Question 16 GoGo Ltd. manufactures three models of children's swing sets: Standard, Deluxe, and Super. The Standard set is made of steel, the Deluxe set is made of aluminum, and the Super set is made of a titanium-aluminum alloy. Because of the different materials used, production requirements differ significantly across models in terms of machine types and time requirements. However, once the parts are produced, assembly time per set is similar for the three models. For this reason, GoGo has adopted the practice of allocating overhead costs on the basis of machine hours. Last year, the company produced 5,000 Standard sets, 500 Deluxe sets, and 2,000 Super sets. The company had the following revenues and expenses for the year: GOGO LTD. Income Statement Year Ended December 31, 2020 Standard Deluxe Super $475,000 $380,000 $560,000 Total $1,415,000 Sales Direct costs: Direct materials 200,000 54,000 150,000 14,000 240,000 24,000 590,000 92,000 Direct labour Variable overhead costs: Machine set-ups 24,790 . 59,850 . Order processing Warehouse . 90,675 32,920 524,765 Shipping Contribution margin . . Fixed overhead costs: Plant administration Other Gross profit 88,690 183,980 $252,095 The chief financial officer of GoGo has hired a consultant to recommend cost allocation bases. The consultant has recommended the following: Activities Cost Drivers Standard 23 25 Total 67 855 Machine set-ups Sales order processing Warehouse costs Shipping No. of production runs No. of sales orders received No. of units held in inventory No. of units shipped Activity Level Deluxe Super 19 210 310 150 110 560 2,370 335 205 465 5,300 8,230 The consultant found no basis for allocating the plant administration and other fixed overhead costs, and recommended that they not be applied to products, (a) Complete the income statement using the bases recommended by the consultant. Do not allocate any fixed overhead costs. (Round overhead rates to 3 decimal places, e.g. 25.225 and final answers to 0 decimal places, e.g. 1525.) (a) Complete the income statement using the bases recommended by the consultant. Do not allocate any fixed overhead costs. (Round overhead rates to 3 decimal places. e.g. 25.225 and final answers to o decimal places, e.g. 1525.) GOGO LTD. Income Statement Year Ended December 31, 2020 Standard Deluxe $475,000 $380,000 Super $560,000 Total $1,415,000 Sales Direct costs: Direct materials Direct labour 200,000 54,000 150,000 14,000 240,000 24,000 590,000 92,000 Variable overhead costs: Machine set-ups 24,790 Order processing 59,850 Warehouse 90,675 Shipping 32,920 Contribution margin 524,765 Fixed overhead costs: Plant administration Other Gross profit 88,690 183,980 $252,095
