Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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 $833,900 $1,015,100
Cost of goods sold
Finished goods, January 1 24,000 17,800
Cost of goods manufactured 544,600 654,400
Total available 568,600 672,200
Finished goods, December 31 17,800 13,300
Cost of goods sold before overhead adjustment 550,800 658,900
Underapplied factory overhead 35,800 14,100
Cost of goods sold 586,600 673,000
Gross profit 247,300 342,100
Selling expenses 81,900 94,500
Administrative expenses 69,000 74,400
Total operating expenses 150,900 168,900
Operating income $96,400 $173,200
Daniels Tool & Die Corporation Inventory Balances
January 1, 2015 December 31, 2015 December 31, 2016
Raw material $21,700 $29,900 $10,400
Work in process $40,500 $47,700 $63,400
Direct labour hours (used in WIP) 1,350 1,630 2,280
Finished goods $24,000 $17,800 $13,300
Direct labour hours (used in FG) 1,470 1,010 840
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 $24,790
Variable factory overhead $153,698
Direct labour hours (used in WIP) 24,790
Direct labour costs (used in FG) $148,740
In 2015 and 2016, the actual direct labour hours used were 20,200 and 23,800, respectively. Raw materials put into production were $291,500 in 2015 and $370,600 in 2016. The actual fixed overhead was $42,300 for 2015 and $23,240 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)

Your answer is correct.
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

Sales

$

1015100

Less

:

Variable costs

Variable cost of goods sold

$

650240

Sales commissions

50755

Total variable costs

700995

Contribution margin

314105

Less

:

Fixed costs

Fixed manufacturing overhead

23240

Fixed selling and administrative expenses

118145

Total fixed costs

141385

Operating income

$

172720

*(b)

Reconcile the difference in operating income between Daniels Tool & Die Corporations 2016 absorption-costing income statement and the revised 2016 income statement prepared under variable costing. (Round answers to 0 decimal places, e.g. 5,275.)
Variable costing operating income $

FMOH deferred in work in process Inventory

FMOH released from finished goods inventory

Absorption costing operating income $

Copyright 2000-2020 by John Wiley & Sons, Inc. or related companies. All rights reserved.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting For Management

Authors: Paresh Shah

2nd Edition

0198077033, 978-0198077039

More Books

Students also viewed these Accounting questions

Question

=+What is the brand's character or personality?

Answered: 1 week ago