Carbon Company provides the following information about resources. Unused Resources Capacity Cost Driver Volume Resources used Materials $ 2,100 9,000 pounds Energy 3,490 390 machine-hours Setups 0 81 setups Purchasing 3,700 90 purchase orders Customer service 4,000 90 returns Long-term labor 4,800 340 labor-hours Administrative 8,820 440 labor-hours Resources supplied Materials $ 101,100 Energy 21,430 Setups 24,300 Purchasing 26,200 Customer service 17,500 Long-term labor 30,300 Administrative 31,700 Sales revenue for Carbon Company is $550,000. Required: A. Prepare a traditional income statement. Traditional Income Statement Total costs B. Prepare an activity-based income statement. Activity-Based Income Statement Resources Used Unused Resource Capacity Resources Supplied Costs Unit Batch Product and customer sustaining Capacity sustaining Total costs
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Carbon Company provides the following information about resources.
Unused Resources Capacity | Cost Driver Volume | ||||
Resources used | |||||
Materials | $ | 2,100 | 9,000 | pounds | |
Energy | 3,490 | 390 | machine-hours | ||
Setups | 0 | 81 | setups | ||
Purchasing | 3,700 | 90 | purchase orders | ||
Customer service | 4,000 | 90 | returns | ||
Long-term labor | 4,800 | 340 | labor-hours | ||
Administrative | 8,820 | 440 | labor-hours | ||
Resources supplied | |||||
Materials | $ | 101,100 | |||
Energy | 21,430 | ||||
Setups | 24,300 | ||||
Purchasing | 26,200 | ||||
Customer service | 17,500 | ||||
Long-term labor | 30,300 | ||||
Administrative | 31,700 | ||||
Sales revenue for Carbon Company is $550,000.
Required:
A. Prepare a traditional income statement.
|
B. Prepare an activity-based income statement.
|
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