The following information is taken from the records of the Zealand Manufacturing Company for the year ending
Question:
The following information is taken from the records of the Zealand Manufacturing Company for the year ending December 31, 2012. There were no beginning or ending inventories.
Sales | $14,000,000 | Long-term rental, factory | $ 85,000 |
Sales commissions | 470,000 | ||
Advertising | 430,000 | Factory Superintendent Salary | 31,000 |
Shipping costs | 320,000 | Factory Supervisor Salaries | 105,000 |
direct materials used | 3,500,000 | ||
Administrative executive salaries | 100,000 | Direct labour | 1,700,000 |
used cutting bits | 53,000 | ||
Administrative administrative salaries (variable) | 370.000 | Factory Methods Investigation | 42,000 |
Abrasives for machining | 99,000 | ||
Fire insurance on factory equipment | 4,000 | indirect work | 950,000 |
Property taxes on factory equipment | 26,000 | Depreciation on factory equipment | 430.000 |
Required
1. Prepare a contribution income statement and an absorption income statement. Prepare a separate support schedule for manufacturing overhead subdivided into fixed and variable costs.
2. Assume that all variable costs fluctuate directly in proportion to sales and that fixed costs are unaffected over a wide range of sales. What would the operating income have been if sales had been $12 million instead of $14 million? What income statement did you use to get your answer? Because?
Introduction to Management Accounting
ISBN: 978-0133058789
16th edition
Authors: Charles Horngren, Gary Sundem, Jeff Schatzberg, Dave Burgsta