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Shellborn Company incurred manufacturing overhead cost for the year as follows. Direct materials $ 39.50 /unit Direct labor $ 27.10 /unit Manufacturing overhead Variable $
Shellborn Company incurred manufacturing overhead cost for the year as follows.
Direct materials | $ | 39.50 | /unit |
Direct labor | $ | 27.10 | /unit |
Manufacturing overhead | |||
Variable | $ | 10.30 | /unit |
Fixed ($19.70/unit for 1,100 units) | $ | 21,670 | |
Variable selling and administrative expenses | $ | 3,660 | |
Fixed selling and administrative expenses | $ | 14,200 | |
The company produced 1,100 units and sold 600 of them at $180.60 per unit. Assume that the production manager is paid a 1 percent bonus based on the companys net income.
Required
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Prepare an income statement using absorption costing.
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Prepare an income statement using variable costing.
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Determine the managers bonus using each approach. Which approach would you recommend for internal reporting?
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