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: Total $1,415,000 590,000 92,000 GOGO LTD. Income Statement Year Ended December 31, 2020 Standard Deluxe Super Sales $475,000 $380,000 $560,000 Direct costs: Direct materials 200,000 150,000 240,000 Direct labour 54,000 14,000 24,000 Variable overhead costs: Machine set-ups Order processing Warehouse Shipping Contribution margin Fixed overhead costs: Plant administration Other Gross profit 24,940 58,825 90,250 35,360 523,625 88,290 183,680 $251,655 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 Machine set-ups 23 Activity Level Deluxe Super 11 24 245 345 100 150 590 2,380 No. of production runs No. of sales orders received No. of units held in inventory No. of units shipped Sales order processing Warehouse costs Shipping 315 225 5,870 Total 58 905 475 8,840 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.) 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 200,000 54,000 150,000 14,000 240,000 24,000 590,000 92,000 Direct labour Variable overhead costs: Machine set-ups 24,940 Order processing 58,825 Warehouse 90,250 Shipping 35,360 Contribution margin 523,625 Fixed overhead costs: Plant administration Other Gross profit 88,290 183,680 $251,655