In 2015 and 2016, the actual direct labour hours used were 20,700 and 23,700, re
ID: 2581936 • Letter: I
Question
In 2015 and 2016, the actual direct labour hours used were 20,700 and 23,700, respectively. Raw materials put into production were $291,900 in 2015 and $370,600 in 2016. The actual fixed overhead was $42,700 for 2015 and $28,260 for 2016, and the planned direct labour rate was the direct labour achieved.
For both years, all of the administrative costs were fixed. The variable portion of the selling expenses results from a 5% commission that is paid as a percentage of the sales revenue.
2015–2016 Comparative Income Statements 2015 2016 Sales $839,800 $1,015,100 Cost of goods sold Finished goods, January 1 24,400 17,100 Cost of goods manufactured 543,000 657,800 Total available 567,400 674,900 Finished goods, December 31 17,100 13,400 Cost of goods sold before overhead adjustment 550,300 661,500 Underapplied factory overhead 35,000 14,200 Cost of goods sold 585,300 675,700 Gross profit 254,500 339,400 Selling expenses 81,100 94,800 Administrative expenses 69,500 74,800 Total operating expenses 150,600 169,600 Operating income $103,900 $169,800
Explanation / Answer
Variable Costing 2015 2016 Sales $839,800 $1,015,100 Given Data Cost Of good Sold 1-Jan-15 31-Dec-15 31-Dec-16 Raw Material inventoty (Refer Given data) $126,270 $144,570 Raw material $21,000 $29,100 $10,300 WIP Inventory Work in process $40,200 $47,000 $63,000 Beginning Inventory (Refere Given data) $40,200 47,000 Direct labour (+) Manufacturing cost Direct labour hours (used in WIP)*0.1 132 162 244 Direct labor 291,900 370,600 Direct labour hours (used in FG)*6 9120 6360 5100 Manufacuring overhead 9252 6522 5344 Fixed (Refer Given Data) $42,700 $28,260 Factory Overhead Fixed $24,750 $24,750 $24,750 Variable $106,020 $83,080 Variable Factoryoverhead $151,280 $106,020 $83,080 Less Ending Invetory $47,000 $63,000 Finished Good inventory $24,400 $17,100 Less Ending Invetory $17,100 $13,400 2015 2016 Total Cost of good sold $695,590 $767,010 Raw Material inventoty (Refer Given data) $126,270 $144,570 Gross profit $144,210 $248,090 Labor Cost ($6.1) $291,900 $370,600 Selling Expenses $123,090 $145,555 Fixed Factory Overhead $42,700 $28,260 Administrative expensess $69,500 $74,800 Variable factory overhead $106,020 $83,080 Total Operating expensess $192,590 $220,355 Operating income ($48,380) $27,735 $566,890 $626,510 Absorption costing Sales $839,800 $1,015,100 Cost Of goods sold $695,590 $767,010 Gross Margin $144,210 $248,090 Selling And Administrative Expensess $192,590 $220,355 Net operating income / Loss ($48,380) $220,355
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