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Wooster Tool Co. is a supplier that assembles purchased parts into components for three distinct Type of componentsComponents A, Components B, and Components C. Following
Wooster Tool Co. is a supplier that assembles purchased parts into components for three distinct Type of componentsComponents A, Components B, and Components C. Following is the statement of operating income for the most recent period: Wooster Tool Co: Statement of Operating Income Total Sales $1,221,500 Cost of goods sold Direct material $410,000 Indirect production (allocated based on machine hours) 60,000 470,000 Gross profit 751,500 Selling and administrative expenses: Commissions 73,900 Distribution to warehouses (allocated based on weight in kilograms) 135,000 208,900 Income before unallocated expenses 542,600 Wooster Tool Co. uses a traditional cost accounting system. Operating data used in the cost accounting system are as follows: Components A Components B Components C Purchase cost of parts assembled $145,000 $175,000 $90,000 Machine hours 7,950 2,650 2,400 Weight of parts shipped (kg) 65,000 495,000 110,000 Sales commissions per unit $4.30 $1.00 $0.40 Units assembled and sold 7,000 21,000 57,000 Sales price per unit $80.00 $16.30 $5.60 You are to compute the operating income/loss for each line of components. Ignore any costs not subject to allocation. Please provide a brief description of your allocation methodology
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