The Daniels Tool & Die Corporation has been in existence for a little over three years….

The Daniels Tool & Die Corporation has been in existence for a little over three years….

Problem 8-35A (Part Level Submission) The Daniels Tool & Die Corporation has been in existence for a little over three years. The company’s 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 hours—the absorption-costing (full) method. Overapplied or underapplied overhead is treated as an adjustment to Cost of Goods Sold. The company’s income statements and other data for the last two years are as follows: DANIELS TOOL & DIE CORPORATION
2015–2016 Comparative Income Statements 2015 2016 Sales $834,600 $1,015,000 Cost of goods sold Finished goods, January 1 25,000 17,300 Cost of goods manufactured 542,300 657,300 Total available 567,300 674,600 Finished goods, December 31 17,300 13,900 Cost of goods sold before overhead adjustment 550,000 660,700 Underapplied factory overhead 35,300 14,100 Cost of goods sold 585,300 674,800 Gross profit 249,300 340,200 Selling expenses 81,700 94,300 Administrative expenses 69,700 74,500 Total operating expenses 151,400 168,800 Operating income $97,900 $171,400 Daniels Tool & Die Corporation Inventory Balances January 1, 2015 December 31, 2015 December 31, 2016 Raw material $21,400 $29,300 $10,700 Work in process $41,000 $47,500 $63,900 Direct labour hours (used in WIP) 1,320 1,580 2,360 Finished goods $25,000 $17,300 $13,900 Direct labour hours (used in FG) 1,550 1,050 800
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 $24,590 Variable factory overhead $152,458 Direct labour hours (used in WIP) 24,590 Direct labour costs (used in FG) $147,540
In 2015 and 2016, the actual direct labour hours used were 20,600 and 24,000, respectively. Raw materials put into production were $291,100 in 2015 and $371,000 in 2016. The actual fixed overhead was $42,300 for 2015 and $24,000 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.) Daniels Tools & Die Corporation
Variable Costing Income Statement
For the year ended December 31, 2016 Total fixed costsFixed costsContribution marginOperating incomeSalesTotal variable costsVariable costs $ LessAdd: Fixed costsVariable costsTotal variable costsTotal fixed costsOperating incomeSalesContribution margin Variable selling and administrative expenses Fixed manufacturing overhead Sales commissions Variable costs of goods available for sale Variable costs of goods manufactured Variable cost of goods sold Fixed selling and administrative expenses $ Fixed manufacturing overhead Fixed selling and administrative expenses Variable cost of goods sold Sales commissions Variable costs of goods manufactured Variable costs of goods available for sale Variable selling and administrative expenses Operating income Variable costs Fixed costs Total variable costs Total fixed costs Sales Contribution margin Fixed costsVariable costsSalesOperating incomeTotal variable costsTotal fixed costsContribution margin LessAdd: Operating incomeFixed costsSalesTotal variable costsTotal fixed costsVariable costsContribution margin Variable costs of goods manufactured Sales commissions Variable selling and administrative expenses Fixed selling and administrative expenses Variable cost of goods sold Fixed manufacturing overhead Variable costs of goods available for sale Variable costs of goods available for sale Fixed manufacturing overhead Variable costs of goods manufactured Variable cost of goods sold Fixed selling and administrative expenses Sales commissions Variable selling and administrative expenses Variable costs Operating income Total variable costs Sales Fixed costs Total fixed costs Contribution margin Contribution marginSalesTotal fixed costsVariable costsOperating incomeFixed costsTotal variable costs $

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