Williams Garden Sheds

Williams Garden Sheds (WGS) manufactures sheds that homeowners use in their yards to store yard implements and gardening supplies. There are 12 shed versions. However, all cost the same to manufacture. Sheds are sold for $5,800 per unit.

The sheds are made in three departments: warehouse, factory, and assembly. Shed manufacture begins with a worker withdrawing the supplies needed for the shed from the warehouse and conveying the shed components to the factory department. There, the lumber needed to make the shed is rendered into the pieces needed to assemble the shed. Finally, the individual shed pieces are conveyed to the assembly department where they are assembled into the completed shed. The buyer arranges (at their own cost) for transporting the shed from WGS to its destination.

All costs except materials costs are treated as fixed manufacturing overhead, while materials are treated as direct, variable costs. The following is a summary of the budgeted departmental fixed manufacturing overhead cost (also called overhead costs). Note the departmental capacity and cost driver for each department.

Overhead Item	Warehouse	Factory	Assembly
Depreciation	40,000	100,000	50,000
Supervisor	65,000	80,000	60,000
Labour	80,000	130,000	210,000
Heat, light, cooling	20,000	20,000	20,000
Property tax	5,000	10,000	10,000
Total	210,000	340,000	350,000
Cost Driver	Materials cost	Machine hours	Labour hours
Practical Capacity	840,000	5,000	7,0000

WGS has a budget allowance that expects workers in the warehouse to handle $300 of the direct materials per labour hour. Each machine hour requires an operator so that labour hours in the factory equal machine hours.

The resources required per shed are $2,700 in materials cost from the warehouse, 14 machine hours in the factory and 22 labour hours in assembly.

Show calculations.

1. Prepare an income statement in due form and indicate what operating income WGS will report if it produces and sells 300 sheds.