Ivanhoe Ltd. manufactures three models of children's swing sets: Standard, Deluxe, and Super. The Standard set is made of steel, the Delunce set is made of aluminum, and the Super set is made of a titanium-aluminum alloy. Because of the different materials used, production requirements differ significantly across models in terms of machine types and time requirements. However, once the parts are produced, assembly time per set is similar for the three models. For this reason, Ivanhoe has adopted the practice of allocating overhead costs on the basis of machine hours. Last year, the company produced 5,000 Standard sets, 500 Deluxe sets, and 2,000 Super sets. The company had the following revenues and expenses for the year: IVANHOELTD. Income Statement Year Ended December 31, 2022 Standard Deluxe Super $475.000 $380,000 $560,000 Total Sales $1.415,000 200.000 150,000 240,000 590,000 92,000 54,000 14,000 24,000 ? ? ? 25,000 60,000 ? ? ? Direct costs: Direct materials Direct labour Variable overhead costs: Machine set-ups Order processing Warehouse Shipping Contribution margin Fixed overhead costs: Plant administration Other ? 2 ? 90,000 2 ? 2 35,000 523.000 ? 2 88.000 182.000 Gross profit $253,000 The chief financial officer of Ivanhoe has hired a consultant to recommend cost allocation bases. The consultant has recommended the following: Activity Level Standard Deluxe Super Total 22 11 17 50 Activities Machine set-ups Sales order processing Warehouse costs Shipping Cost Drivers No. of production runs No. of sales orders received No. of units held in inventory No. of units shipped 300 200 300 800 200 100 100 400 5.000 500 2.000 8 7,500 The consultant found no basis for allocating the plant administration and other fixed overhead costs, and recommended that they not be applied to products (a) Complete the income statement using the bases recommended by the consultant Do not allocate any fixed overhead costs. (Round overhead rates to 4 decimal places es 25.2255 and final answers to decimal places, es 1525.) IVANHOELTD. Income Statement Year Ended December 31, 2022 Total Standard Deluxe Super $560.000 $380,000 $425.000 $1.415,000 Shipping No. of units shipped 5.000 500 2,000 7.500 The consultant found no basis for allocating the plant administration and other fored overhead costs and recommended that they not be applied to products (a) Complete the income statement using the bases recommended by the consultant. Do not allocate any fixed overhead costs (Round overhead rotes to 4 decimal places. e.3. 25.2255 and final answers to decimal places, es 1525) IVANHOELTD Income Statement Year Ended December 31, 2022 Deluxe Standard $475,000 Super Total Sales $380,000 $560,000 $1,415.000 200,000 150.000 240.000 590.000 Direct costs: Direct materials Direct labour Variable overhead costs 54.000 14.000 24,000 92.000 Machine set ups 25,000 Order processing 80,000 Warehouse 90.000 Shipping 35,000 Contribution margin $ 525.000 Fond overhead Cost Plant administration 38.000 Other 182.000 Groupon $250.000
