The Daniels Tool & Die Corporation has been in existence for a little over three years. The company?s 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 hours?the absorption-costing (full) method. Overapplied or underapplied overhead is treated as an adjustment to Cost of Goods Sold. The company?s income statements and other data for the last two years are as follows:
v (3) Prepare an incremental analysis to determine if Current Designs should purchase the new rotomould oven, assuming that the average price for natural gas over the next 10 years will be $0.70 per therm. (If an amount reduces the net income then enter with a negative sign preceding the number or parenthesis, e.g. -15,000, (15,000). Enter all other amounts as positive and subtract where necessary.) Regular operations $ $ $ Cost of the new oven Salvage of old oven Current Designs :1 purchase the new rotomould oven. 'VLINK T0 TEX'I'V' DANIELS TOOL & DIE CORPORATION 2015-2016 Comparative Income Statements Sales Cost of goods sold Finished goods, January 1 Cost of goods manufactured Total available Finished goods, December 31 Cost of goods sold before overhead adjustment Underapplied factory overhead Cost of goods sold Gross prot Selling expenses Administrative expenses Total operating expenses Operating income $839,800 24,400 543,000 567,400 17,100 550,300 35,000 585,300 254,500 81,100 69,500 150,600 $103,900 $1,015,100 17,100 657,800 674,,900 1 3,400 661,500 14,200 675,700 339,400 94,800 74,800 169,600 $169,800 Daniels Tool 8: Die Corporation Inventory Balances Raw material $21,000 $29,100 $10,300 Work in process $40,200 $47,000 $63,000 Direct labour hours (used in WIP) 1,320 1,620 2,440 Finished goods $24,400 $17,100 $13,400 Direct labour hours (used in FG) 1,520 1,060 850 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 $24,750 Variable factory overhead $153,450 Direct labour hours (used in WIP) 24,750 Direct labour costs (used in FG) $148,500 In 2015 and 2016, the actual direct labour hours used were 20,700 and 23,700, respectively. Raw materials put into production were $291,900 in 2015 and $370,600 in 2016. The actual xed overhead was $42,700 for 2015 and $28,260 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. V (a) For the year ended December 31, 2016, prepare a revised income statement for Daniels Tool & Die Corporation using the variablecosting method. (Round answers to a decimal places, e.g. 5,275.) Daniels Tools 81 Die Corporation Variable Costing Income Statement For the year ended December 31, 2016
