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) 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 )

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Aug 11, 2024

The Daniels Tool & Die Corporation has been in existence for a little over three years. The companys sales have been increasing each year as

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)

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.)