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GoGo Ltd. manufactures three models of children's swing sets: Standard, Delo, and Super The Standard set is made of steel, the Deluxe set is made
GoGo Ltd. manufactures three models of children's swing sets: Standard, Delo, 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 over head 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 GOGO LTD Income Statement Year Ended December 31, 2020 Standard Deluxe Super Total Sales $475,000 $380,000 $560,000 $1.415.000 Direct costs: Direct materials 200,000 150,000 240.00 590,000 Direct labour 54,000 14.000 24,000 92,000 Variable overhead costs: Machine set-ups 2 ? 2 24.790 Order processing ? 2 ? 61.950 Warehouse ? 7 2 89.100 Shipping ? 2 ? 35,720 Contribution margin ? 521440 Fixed Overhead costs: Plant administration 89,810 Other 182,960 Gross profit 5248.670 2 3 The chief financial officer of GoGo has hired a consultant to recommend cost allocation bases. The consultant has recommended the following: Total Activities Machine set-ups Sales order processing Warehouse costs Shipping Cost Drivers No. of production runs No. of sales orders received No. of units held in inventory No. of units shipped Standard 23 340 240 5,990 Activity Level Deluxe Super 19 25 225 320 120 135 500 2,440 67 885 495 8.930 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 foued overhead costs (Round overhead rates to 3 decimal places es. 25.225 and final answers to decimal places, es 1525) GOGO LTD. Income Statement Year Ended December 31, 2020 Standard Dekre Super Total Sales $475,000 $380.000 $560,000 51415.000 Direct costs: Direct 200.000 materials 150,000 240.000 520.000 Direct labour 54,000 14,000 24.000 92.000 Variable overhead costs: Machine set 24790 ups Order 61.950 processing Warehouse 89.100 Shipping 35.720 $ 521.440 Contribution margin Fosed overhead COSTS: Plant administration Other Gross profit 89.810 182.960 $248,670
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