Question
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
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 8,000 units of M3100, 17,500 units of M4100, and 10,000 units of M6100 and had the following revenues and costs:
MTI | ||||||||
Income Statement | ||||||||
M3100 | M4100 | M6100 | Total | |||||
Sales revenue | $ | 9,400,000 | $ | 15,700,000 | $ | 14,200,000 | $ | 39,300,000 |
Direct costs | ||||||||
Direct materials | 3,300,000 | 4,800,000 | 3,100,000 | 11,200,000 | ||||
Direct labor | 610,000 | 860,000 | 1,730,000 | 3,200,000 | ||||
Variable overhead | ||||||||
Setting up machines | 2,352,000 | |||||||
Processing sales orders | 1,794,000 | |||||||
Warehousing | 2,204,000 | |||||||
Operating machines | 1,175,000 | |||||||
Shipping | 994,000 | |||||||
Contribution margin | $ | 16,381,000 | ||||||
Plant administration | 6,400,000 | |||||||
Gross profit | $ | 9,981,000 | ||||||
MTIs controller has heard about activity-based costing and puts together an employee team to recommend cost allocation bases. The employee team recommends the following.
Activity | Cost Driver | M3100 | M4100 | M6100 |
Setting up machines | Production runs | 9 | 18 | 21 |
Processing sales orders | Sales orders received | 170 | 390 | 220 |
Warehousing | Units held in inventory | 90 | 180 | 110 |
Operating machines | Machine-hours | 6,200 | 9,900 | 8,900 |
Shipping | Units shipped | 10,000 | 17,500 | 8,000 |
The employee team recommends that plant administration costs not be allocated to products.
Required:
a. Using machine-hours to allocate overhead, complete the income statement for MTI. Do not allocate plant administrative costs to products.
b-1. Compute the cost driver rates. b-2. Complete the income statement using the activity-based costing method suggested by the employee team.
Complete this question by entering your answers in the tabs below. Req A Req B1 Req B2 Using machine-hours to allocate overhead, complete the income statement for MTI. Do not allocate plant adm to products. (Do not round intermediate calculations. Input all amounts as positive values.) MTI Income Statement M3100 M4100 9,400,000 $ 15,700,000 M6100 Total Sales revenue $ $ 14,200,000 $ 39,300,000 Direct costs: Direct material 3,300,000 610,000 4.800,000 860,000 3,100,000 1,730,000 11,200,000 3,200,000 Direct labor Variable overhead Contribution margin $ 5,490,000 $ 10,040,000 $ 9,370,000 $ Plant administration Gross profit 24,900,000 6,400,000 18,500,000 $ Req B1 > Prev 1 of 4 Next > 10. and 11 i Saved a. Using machine-hours to allocate overhead, complete the income statement for MII. Do not allocate plant administrative costs to products. b-1. Compute the cost driver rates, b-2. Complete the income statement using the activity-based costing method suggested by the employee team. Complete this question by entering your answers in the tabs below. Req A Req B1 Req B2 Compute the cost driver rates. Unit Rate per run per order Activity Setting up machines Processing sales orders Warehousing Operating machines Shipping I per unit per machine-hr per unit shipped Prev 1 of 4 Next > Complete this question by entering your answers in the tabs below. Reg A Req B1 Req B2 Complete the income statement using the activity-based costing method suggested by the employee team. (Input all amounts as positive values.) MTI Income Statement M3100 M4100 M6100 Sales revenue $ 9,400,000 $ Total 39,300,000 15,700,000 $ 14,200,000 $ 3,300,000 610,000 4,800,000 860,000 3,100,000 1,730,000 11,200,000 3,200,000 Direct costs: Direct material Direct labor Variable overhead Setting up machines Processing orders Warehousing Operating machines Shipping Contribution margin Plant administration Gross profit 2,352,000 1,794,000 2,204,000 1,175,000 994.000 6,400,000 (6,400,000) $ Prev 1 of 4 Next >Step by Step Solution
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