a). Compute the cost drive rate for each resource. b). Sales revenue for Carbon
ID: 2531529 • Letter: A
Question
a). Compute the cost drive rate for each resource.
b). Sales revenue for Carbon Company is $300,000. Prepare a traditional income statement and an activity-based income statement.
I LAN TUJI presources Used versus Resources Supplied: Working Backward * Company provides the following information about resources: C ost Driver Volume Unused Resources Capacity Resources used Materials ...... $ 2,000 Energy.............. 1,560 Setups.............. -0- Purchasing. .......... 1,800 Customer service . . . . . . ... 7,600 Long-term labor... 3,400 Administrative ............ 2,800 Resources supplied Materials . ....... $98,000 Energy............ 17,880 Setups........... 24,000 Purchasing. ....... 21,000 Customer service . 15,600 Long-term labor. 29,000 Administrative ........ 28,000 8,000 pounds 340 machine-hours 80 setups 80 purchase orders 50 returns 320 labor-hours 420 labor-hoursExplanation / Answer
Solution (a):
Resources
Resources Supplied ($)
Resources Unused
($)
Resources Used ($) = Resources Supplied - Resources Unused
Materials
98,000
2,000
96,000
Energy
17,880
1,560
16,320
Setups
24,000
0
24,000
Purchasing
21,000
1,800
19,200
Customer service
15,600
7,600
8,000
Long-term labor
29,000
3,400
25,600
Administrative
28,000
2,800
25,200
Cost drive rate for each resource
Resources
Cost driver volume (given)
Cost Drive Rate
Formula = Resources used / Cost driver Volume
Materials
8,000 pounds
= $ 96,000 / 8,000 pounds
= $ 12 per pound
Energy
340 machine-hours
=16,320/ 340 machine-hours
= 48 per machine-hour
Setups
80 set ups
=24,000 / 80 set ups
= 300 per setup
Purchasing
80 purchase orders
=19,200/80 purchase orders
=240 per purchase order
Customer service
50 returns
=8,000/ 50 returns
=160 per return
Long-term labor
320 labor hours
=25,600/ 320 labor hours
= 80 per labor-hour
Administrative
420 labor hours
=25,200/ 420 labor hours
=60 per labor-hour
Solution (b):
Traditional income statement
Carbon Company
For the year ended……..
Particular
Amount ($)
Amount ($)
Sales revenue
300,000
Less:
Materials
(98,000)
Energy
(17,880)
Setups
(24,000)
Purchasing
(21,000)
Customer service
(15,600)
Long-term labor
(29,000)
Administrative
(28,000)
Total Cost
(233,480)
Operating Profit
66,520
Note: Resources supplied are used in traditional income statement.
Activity-based income statement
Carbon Company
For the year ended……..
Particulars
Resources Used ($)
Resources Unused ($)
Resources Supplied ($)
Amount ($)
Sales revenue
300,000
COSTS
Unit
Materials
96,000
2,000
98,000
Energy
16,320
1,560
17,880
Total
112,320
3,560
115,880
Batch
Setups
24,000
0
24,000
Total
24,000
0
24,000
Product and customer sustaining
Purchasing
19,200
1,800
21,000
Customer service
8,000
7,600
15,600
Total
27,200
9,400
36,600
Capacity sustaining
Long-term labor
25,600
3,400
29,000
Administrative
25,200
2,800
28,000
Total
50,800
6,200
57,000
Total Cost
214,320
19,160
233,480
233,480
Operating Profit
66,520
Note: Resources supplied are used in activity based income statement.
Kindly rate, if you find solution satisfactory.
Resources
Resources Supplied ($)
Resources Unused
($)
Resources Used ($) = Resources Supplied - Resources Unused
Materials
98,000
2,000
96,000
Energy
17,880
1,560
16,320
Setups
24,000
0
24,000
Purchasing
21,000
1,800
19,200
Customer service
15,600
7,600
8,000
Long-term labor
29,000
3,400
25,600
Administrative
28,000
2,800
25,200
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