Problem 8-35A (Part Level Submission)

The Daniels Tool & Die Corporation has been in existence for a little over three years. The companys sales have been increasing each year as it builds a reputation. The company manufactures dies to its customers specifications and therefore uses a job-order cost system. Factory overhead is applied to the jobs based on direct labour hoursthe absorption-costing (full) method. Overapplied or underapplied overhead is treated as an adjustment to Cost of Goods Sold. The companys income statements and other data for the last two years are as follows:

DANIELS TOOL & DIE CORPORATION 20152016 Comparative Income Statements
			2015		2016
Sales			$835,700		$1,015,200
Cost of goods sold
	Finished goods, January 1		24,000		17,700
	Cost of goods manufactured		545,300		657,600
	Total available		569,300		675,300
	Finished goods, December 31		17,700		13,300
	Cost of goods sold before overhead adjustment		551,600		662,000
	Underapplied factory overhead		35,200		14,000
Cost of goods sold			586,800		676,000
Gross profit			248,900		339,200
Selling expenses			81,700		94,100
Administrative expenses			69,200		74,600
	Total operating expenses		150,900		168,700
Operating income			$98,000		$170,500

Daniels Tool & Die Corporation Inventory Balances
		January 1, 2015			December 31, 2015			December 31, 2016
Raw material		$21,300			$29,300			$10,600
Work in process		$40,700			$47,300			$63,500
Direct labour hours (used in WIP)		1,390			1,650			2,480
Finished goods		$24,000			$17,700			$13,300
Direct labour hours (used in FG)		1,450			1,040			810

Daniels used the same predetermined overhead rate in applying overhead to its production orders in both 2015 and 2016. The rate was based on the following estimates:

Fixed factory overhead		$24,580
Variable factory overhead		$152,396
Direct labour hours (used in WIP)		24,580
Direct labour costs (used in FG)		$147,480

In 2015 and 2016, the actual direct labour hours used were 21,000 and 23,500, respectively. Raw materials put into production were $291,600 in 2015 and $370,900 in 2016. The actual fixed overhead was $42,400 for 2015 and $30,200 for 2016, and the planned direct labour rate was the direct labour achieved. For both years, all of the administrative costs were fixed. The variable portion of the selling expenses results from a 5% commission that is paid as a percentage of the sales revenue.

(a)

For the year ended December 31, 2016, prepare a revised income statement for Daniels Tool & Die Corporation using the variable-costing method. (Round answers to 0 decimal places, e.g. 5,275.)

Daniels Tools & Die Corporation Variable Costing Income Statement For the year ended December 31, 2016
Contribution marginSalesTotal variable costsTotal fixed costsOperating incomeFixed costsVariable costs				$
LessAdd : Total variable costsSalesContribution marginTotal fixed costsOperating incomeFixed costsVariable costs
Variable selling and administrative expenses Fixed selling and administrative expenses Variable cost of goods sold Variable costs of goods manufactured Fixed manufacturing overhead Sales commissions Variable costs of goods available for sale		$
Fixed selling and administrative expenses Sales commissions Fixed manufacturing overhead Variable costs of goods manufactured Variable costs of goods available for sale Variable selling and administrative expenses Variable cost of goods sold
Fixed costs Operating income Variable costs Total variable costs Total fixed costs Sales Contribution margin
Total variable costsOperating incomeFixed costsTotal fixed costsVariable costsSalesContribution margin
AddLess : Total fixed costsSalesOperating incomeVariable costsContribution marginFixed costsTotal variable costs
Fixed manufacturing overhead Sales commissions Variable costs of goods manufactured Fixed selling and administrative expenses Variable cost of goods sold Variable costs of goods available for sale Variable selling and administrative expenses
Sales commissions Variable cost of goods sold Variable selling and administrative expenses Variable costs of goods available for sale Fixed selling and administrative expenses Variable costs of goods manufactured Fixed manufacturing overhead
Sales Variable costs Total fixed costs Fixed costs Total variable costs Contribution margin Operating income
Contribution marginTotal variable costsFixed costsTotal fixed costsOperating incomeVariable costsSales				$