Problem 1-27A (Algo) Importance of cost classification LO 1-3, 1-6 Fundie Manufachuring Compnny (CMA) wat started when it scquired $93,000 try insuing common stocle During the first year af operations, the comparty incurted specificaly identifiable product costs (materials, labor, and overhead) ameunting to \$60.000. CMAC hlso incurred $64.000 of engineering desigh and planeing cests. There was a debate regarding how the design and plenning costs chould be clastified. Advocktes of Option t belleve that the costs shovld be classified as general, seding, and bdininisteative costs. Autvocates of Cption 2 believe it is mote appropripte to class 1 the desigh and plbnning costs as product costs. During the yea, CMC made 4,000 units of preduct and sold 3,100 units at p price of 539.60 each A transactions were cash trantsctsons. Aequired a-1. Prepme an income statevtuent and balance sheet under eption 1 a. 2. Prepare an income statement and balence sheet under opton 2 b. Identay the opticn thet resuls in financid statements that are more likely to leave a favorable impressign ce invevtars and creciststs c. Assume that CMC prowides an incentwe boris to the company president eeual to ts percent of net income. Compute the amaunt of the bonus under each of the teva eptions. Idechig the option that peovides the presldent with the higher benut d. Assume a 35 percent income tax rate. Determine the amount of income tax enperse urider each of the two botions. Identify the option that ininifilet the ambunt of the company/s incorte time expense Complete this question br ertering your answer in the tabs below. Frepare a caps-boled inceme statement fur Opiles 1 . Problem 1-27A (Algo) Importance of cost classification LO 1-3,1-6 Rundle Manufacturing Company (CMC) was started when it acquired $93,000 by issuing common stock. During the first year operations, the company incurred specifically identifiable product costs (materials, labor, and overhead) amounting to $60,00 also incurred $64,000 of engineering design and planning costs. There was a debate regarding how the design and planning should be classified. Advocates of Option 1 believe that the costs should be classified as general, selling, and administrative Advocates of Option 2 believe it is more appropriate to classify the design and planning costs as product costs. During the ye made 4,000 units of product and sold 3,100 units at a price of $39.00 each. All transactions were cash transactions. Required a-1. Prepare an income statement and balance sheet under option 1 . a-2. Prepare an income statement and balance sheet under option 2. b. Identify the option that results in financial statements that are more likely to leave a favorable impression on investors an creditors. c. Assume that CMC provides an incentive bonus to the company president equal to 14 percent of net income. Compute the of the bonus under each of the two options. Identify the option that provides the president with the higher bonus. d. Assume a 35 percent income tax rate. Determine the amount of income tax expense under each of the two options. Iden option that minimizes the amount of the company's income tax expense. Complete this question by entering your answer in the tabs below. Prepare a balance sheet for Option 1 . Problem 1-27A (Algo) Importance of cost classification LO 1-3, 1.6 Rundte Menulacturing Company (CMC) was started when it ecqueed $93.000 by bsuing common stock. During the finst year of operetions, the company incurred specificaly identiable product costs (materials, laboe, and overtioad anounsing to $60,000. CMC also incurred 564,000 of eng neering dosign and planning costs. There was a debsto ceganding how the design and planning costs should be classified. Advocates of Option 1 believe that the costs theuld be class fied as general, seling, and administrative costs. Advocates of Option 2 belive it is more appropriate to clossify the design and plarving costs as product costs. Ouring the year, CMC made 4,000 units of product and sold 3,100 units at a price of $39,00 eoch. All transactions were cash tansactions. Required a-1. Prepare as income statement and balance sheet under option 1 . a-2. Prepare an inceme statement and bolance sheet under eption 2 . b. Identify the option that resuls in financial statements that are more likely to leave a faverable imprestion on incestors and credtors. c. Assume that CMC ptovides an incentive bonus to the company president equal to 14 percent of net income. Compute the amount of the bonus under each of the two cotions. Identify the option that provides the presidert with the Higher bonus:. d. Assume 435 percent income lax rate. Detertine the amount of income tax expense under each of the two options identfy the option that minimires the smount of the compary's inceme tak expense. Cemplete this question by entering your answer in the tabs below. Prebeie a Gapp-based incore statement for Ootion 2. Rroblem 1-27A (Algo) Importance of cost classification LO 1-3, 1-6 Rundle Manufacturing Company (CMC) was started when it acquired $93,000 by issuing common stock. During the first year of operations, the company incurred specifically identifiable product costs (materials, labor, and overhead) amounting to $60,000. CMC also incurred $64,000 of engineering design and planning costs. There was a debate regarding how the design and planning costs should be classified. Advocates of Option 1 believe that the costs should be classified as general, selling, and administrative costs. Advocates of Option 2 believe it is more appropriate to classify the design and planning costs as product costs. During the year, CMC made 4,000 units of product and sold 3,100 units at a price of $39.00 each. All transactions were cash transactions. Required a-1. Prepare an income statement and balance sheet under option 1. a.2. Prepare an income statement and balance sheet under option 2 . b. Identify the option that results in financial statements that are more likely to leave a favorable impression on irvestors and creditors. c. Assume that CMC provides an incentive bonus to the company president equal to 14 percent of net income. Compute the amount of the bonus under each of the two options. Identify the option that provides the president with the higher bonus. d. Assume a 35 percent income tax rate. Determine the amount of income tax expense under each of the two options. Identify the option that minimizes the amount of the company's income tax expense. Complete this question by entering your answer in the tabs below. Problem 1-27A (Algo) Importance of cost classification LO 1-3, 1-6 Fundie Manufachuring Compnny (CMA) wat started when it scquired $93,000 try insuing common stocle During the first year af operations, the comparty incurted specificaly identifiable product costs (materials, labor, and overhead) ameunting to \$60.000. CMAC hlso incurred $64.000 of engineering desigh and planeing cests. There was a debate regarding how the design and plenning costs chould be clastified. Advocktes of Option t belleve that the costs shovld be classified as general, seding, and bdininisteative costs. Autvocates of Cption 2 believe it is mote appropripte to class 1 the desigh and plbnning costs as product costs. During the yea, CMC made 4,000 units of preduct and sold 3,100 units at p price of 539.60 each A transactions were cash trantsctsons. Aequired a-1. Prepme an income statevtuent and balance sheet under eption 1 a. 2. Prepare an income statement and balence sheet under opton 2 b. Identay the opticn thet resuls in financid statements that are more likely to leave a favorable impressign ce invevtars and creciststs c. Assume that CMC prowides an incentwe boris to the company president eeual to ts percent of net income. Compute the amaunt of the bonus under each of the teva eptions. Idechig the option that peovides the presldent with the higher benut d. Assume a 35 percent income tax rate. Determine the amount of income tax enperse urider each of the two botions. Identify the option that ininifilet the ambunt of the company/s incorte time expense Complete this question br ertering your answer in the tabs below. Frepare a caps-boled inceme statement fur Opiles 1 . Problem 1-27A (Algo) Importance of cost classification LO 1-3,1-6 Rundle Manufacturing Company (CMC) was started when it acquired $93,000 by issuing common stock. During the first year operations, the company incurred specifically identifiable product costs (materials, labor, and overhead) amounting to $60,00 also incurred $64,000 of engineering design and planning costs. There was a debate regarding how the design and planning should be classified. Advocates of Option 1 believe that the costs should be classified as general, selling, and administrative Advocates of Option 2 believe it is more appropriate to classify the design and planning costs as product costs. During the ye made 4,000 units of product and sold 3,100 units at a price of $39.00 each. All transactions were cash transactions. Required a-1. Prepare an income statement and balance sheet under option 1 . a-2. Prepare an income statement and balance sheet under option 2. b. Identify the option that results in financial statements that are more likely to leave a favorable impression on investors an creditors. c. Assume that CMC provides an incentive bonus to the company president equal to 14 percent of net income. Compute the of the bonus under each of the two options. Identify the option that provides the president with the higher bonus. d. Assume a 35 percent income tax rate. Determine the amount of income tax expense under each of the two options. Iden option that minimizes the amount of the company's income tax expense. Complete this question by entering your answer in the tabs below. Prepare a balance sheet for Option 1 . Problem 1-27A (Algo) Importance of cost classification LO 1-3, 1.6 Rundte Menulacturing Company (CMC) was started when it ecqueed $93.000 by bsuing common stock. During the finst year of operetions, the company incurred specificaly identiable product costs (materials, laboe, and overtioad anounsing to $60,000. CMC also incurred 564,000 of eng neering dosign and planning costs. There was a debsto ceganding how the design and planning costs should be classified. Advocates of Option 1 believe that the costs theuld be class fied as general, seling, and administrative costs. Advocates of Option 2 belive it is more appropriate to clossify the design and plarving costs as product costs. Ouring the year, CMC made 4,000 units of product and sold 3,100 units at a price of $39,00 eoch. All transactions were cash tansactions. Required a-1. Prepare as income statement and balance sheet under option 1 . a-2. Prepare an inceme statement and bolance sheet under eption 2 . b. Identify the option that resuls in financial statements that are more likely to leave a faverable imprestion on incestors and credtors. c. Assume that CMC ptovides an incentive bonus to the company president equal to 14 percent of net income. Compute the amount of the bonus under each of the two cotions. Identify the option that provides the presidert with the Higher bonus:. d. Assume 435 percent income lax rate. Detertine the amount of income tax expense under each of the two options identfy the option that minimires the smount of the compary's inceme tak expense. Cemplete this question by entering your answer in the tabs below. Prebeie a Gapp-based incore statement for Ootion 2. Rroblem 1-27A (Algo) Importance of cost classification LO 1-3, 1-6 Rundle Manufacturing Company (CMC) was started when it acquired $93,000 by issuing common stock. During the first year of operations, the company incurred specifically identifiable product costs (materials, labor, and overhead) amounting to $60,000. CMC also incurred $64,000 of engineering design and planning costs. There was a debate regarding how the design and planning costs should be classified. Advocates of Option 1 believe that the costs should be classified as general, selling, and administrative costs. Advocates of Option 2 believe it is more appropriate to classify the design and planning costs as product costs. During the year, CMC made 4,000 units of product and sold 3,100 units at a price of $39.00 each. All transactions were cash transactions. Required a-1. Prepare an income statement and balance sheet under option 1. a.2. Prepare an income statement and balance sheet under option 2 . b. Identify the option that results in financial statements that are more likely to leave a favorable impression on irvestors and creditors. c. Assume that CMC provides an incentive bonus to the company president equal to 14 percent of net income. Compute the amount of the bonus under each of the two options. Identify the option that provides the president with the higher bonus. d. Assume a 35 percent income tax rate. Determine the amount of income tax expense under each of the two options. Identify the option that minimizes the amount of the company's income tax expense. Complete this question by entering your answer in the tabs below