Question
Benson Manufacturing pays its production managers a bonus based on the companys profitability. During the two most recent years, the company maintained the same cost
Benson Manufacturing pays its production managers a bonus based on the companys profitability. During the two most recent years, the company maintained the same cost structure to manufacture its products.
| Year | Units Produced | Units Sold | ||||
| Production and Sales | ||||||
| Year 2 | 4,000 | 4,000 | ||||
| Year 3 | 6,000 | 4,000 | ||||
| Cost Data | ||||||
| Direct materials | $ | 14.90 | per unit | |||
| Direct labor | $ | 22.70 | per unit | |||
| Manufacturing overheadvariable | $ | 11.90 | per unit | |||
| Manufacturing overheadfixed | $ | 97,800 | ||||
| Variable selling and administrative expenses | $ | 8.60 | per unit sold | |||
| Fixed selling and administrative expenses | $ | 58,000 | ||||
(Assume that selling and administrative expenses are associated with goods sold.)
Benson sells its products for $109.30 per unit.
Required
Task 1: Prepare income statements based on absorption costing for Year 2.
| Benson Manufacturing | ||
| Absorption Costing Income Statement | ||
| or the Year Ended Dec. 31, Year 2 | ||
| Revenues | ||
| Cost of Goods Sold: | ||
| Direct Labor | ||
| Direct Materials | ||
| Manufacturing overhead | ||
| Gross Margin | ||
| Selling and Administrative Expenses | ||
| Net Income |
Task 2: Prepare income statements based on absorption costing for Year 3.
| Benson Manufacturing | ||
| Absorption Costing Income Statement | ||
| For the Year Ended Dec. 31, Year 2 | ||
| Revenues | ||
| Cost of Goods Sold: | ||
| Direct Labor | ||
| Direct Materials | ||
| Manufacturing overhead | ||
| Gross Margin | ||
| Selling and Administrative Expenses | ||
| Net Income | ||
| Ending Inventory for Year 3 |
Task 3: Determine the costs of ending inventory for Year 3.
| Ending Inventory |
Task 4: Prepare income statements based on variable costing for Year 2.
| Benson Manufacturing | ||
| Variable Costing Income Statement | ||
| For the Year Ended Dec. 31, Year 3 | ||
| Revenues | ||
| Variable Costs: | ||
| Direct Labor | ||
| Direct Materials | ||
| Variable manufacturing overhead | ||
| Variable Selling and administrative expenses | ||
| Contribution Margin | ||
| Fixed manufacturing overhead | ||
| Fixed selling and administrative expenses | ||
| Net Income |
Task 4: Prepare income statements based on variable costing for Year 3.
| Benson Manufacturing | ||
| Variable Costing Income Statement | ||
| For the Year Ended Dec. 31, Year 3 | ||
| Revenues | ||
| Variable Costs: | ||
| Direct Labor | ||
| Direct Materials | ||
| Variable manufacturing overhead | ||
| Variable Selling and administrative expenses | ||
| Contribution Margin | ||
| Fixed manufacturing overhead | ||
| Fixed selling and administrative expenses | ||
| Net Income |
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The Wall Street Mba
Authors: Reuben Advani
2nd Edition
007178831X, 9780071788311
