Dilia Company incurred manufacturing overhead cost for the year as follows: a) Direct materials Direct labor Manufacturing overhead Variable Fixed ($25/unit for 1,500 units) Variable selling and administrative expenses Fixed selling and administrative expenses $ 50 S 35 S 15 Absorption costing Variable costing Which approach is recommended? $ 37,500 S 10,500 $ 20,000 /unit /unit /unit The company produced 1,500 units and sold 1,200 of them at $225 per unit. Assume that the production manager is paid a 2 percent bonus based on the company's net income. Required 1. Prepare an income statement using absorption costing. 2. Prepare an income statement using variable costing. 3. Determine the manager's bonus using each approach. Which approach would you recommend for internal reporting?
Dilia Company incurred manufacturing overhead cost for the year as follows: a) Direct materials Direct labor Manufacturing overhead Variable Fixed ($25/unit for 1,500 units) Variable selling and administrative expenses Fixed selling and administrative expenses $ 50 S 35 S 15 Absorption costing Variable costing Which approach is recommended? $ 37,500 S 10,500 $ 20,000 /unit /unit /unit The company produced 1,500 units and sold 1,200 of them at $225 per unit. Assume that the production manager is paid a 2 percent bonus based on the company's net income. Required 1. Prepare an income statement using absorption costing. 2. Prepare an income statement using variable costing. 3. Determine the manager's bonus using each approach. Which approach would you recommend for internal reporting?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Dilia Company incurred manufacturing overhead cost for the year as follows:
a)
Direct materials
Direct labor
Manufacturing overhead
Variable
Fixed ($25/unit for 1,500 units)
Variable selling and administrative expenses
Fixed selling and administrative expenses
$
50
$ 35
S 15
Absorption costing
Variable costing
Which approach is recommended?
S 37,500
$ 10,500
$ 20,000
/unit
/unit
/unit
The company produced 1,500 units and sold 1,200 of them at $225 per unit. Assume that the production manager is paid a 2 percent bonus based on the company's net income.
Required
1. Prepare an income statement using absorption costing.
2. Prepare an income statement using variable costing.
3. Determine the manager's bonus using each approach. Which approach would you recommend for internal reporting?
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