MTI makes three types of lawn tractors: M3100, M4100, and M6100. In the past, it allocated overhead to products using machine-hours. Last year, the company produced 11,000 units of M3100, 16,000 units of M4100, and 8,000 units of M6100 and had the following revenues and costs:
Income Statement ME TOO MATOO METOO* Total ESLEE REVENUE $6. 500, 000| $15.50 0.000| $12.800. 000| 537.800. 0.01 Direct costs :\\ Direct material 3. 100. 001\\ 4.500.007\\ 3.40 0.00 0\\ 1 1 . 000.001 Direct labor* 5:30.001\\ 2 20. QOD\\ 1 . 720.000* 3. 230.001\\ Variable overhead Contribution margin* Flant administration* Gross profit |` Compete the income Statement using the activity - based costing method suggested by the EmployEE LEEMT .* Activity Unit Plate Setting up machines* per run Processing =GLEE andErs per order Warehousing* \\per unit Operating machines* per machine - hr* Shipping per unit shipped MITI Income Statement 1:3 1:010 MAILID METOO Total SELE= REVENUE $ &.SOO , OOO| }15, 500 , 0OC $12 , 600, 000 | }37. BOO. OOD Direct costs :` Direct material 3 . 10 0, 000 4.50 0 .000\\ 3. 40 0, 000 1 1 . 000.0OD Direct labor* $20. 090\\ 1 . 720, 00 01 3. 2.30.090 Variable overhead Setting up machines 2.5 50. 000 Processing orders* 1. 628.001 Warehousing* 2.600. 000 Operating machine =* 1. 080. 0.01 Shipping Contribution margin $ 14.532. 000 Flant administration Gross profit $ 8.5.32. 000MTI makes three types 01 lawn tractors: M3100, M4100, and M6100. In the past, it allocated overhead to products ustng machine-hours. Last year, the company produced 11,000 units of M3100, 16,000 units of M4100, and 8,000 units of M6100 and had the following revenues and costs. Sales revenue Direct costs Direct materials Direct labor Variable overhead Setting up machines Processing sales orders Warehousing Operating machines Shipping Contribution margin Plant administration Gross prot MTI Income Statement M3100 M4100 M61 I10 Totd $ 9,500,000 $ 15,500,000 3 12,600,000 $ 3T,600,000 3,400,000 1,?30,000 1 1 ,000,000 3,230,000 3,1 00,000 580,000 4,500,000 920,000 2,550,000 1,620 , 000 2,600,000 1,080 , 000 980,000 $ 14,532,000 6,000,000 $ 8,532,000 MTI's controller has heard about activitybased costing and puts to gether an employee team to recommend cost allocation bases The employee team recommends the following Activity Setting up machines Processing sales orders Warehousing Operating machines Shipping Cmt Driver M3100 M4100 M6100 Production runs 10 21 20 Sales orders received 1?0 370 200 Units held in inventory 110 190 100 Machinehours 6,400 8,900 8300 Units shipped 3,000 16,000 11,000 The employee team recommends that plant administratton costs not be allocated to products
