Chapter 10, Problem 58P

Activity-Based Reporting: Manufacturing

 Leidenheimer Corporation manufactures small airplane propellers. Sales for year 2 totaled $1,700,000. Information regarding resources for the month follows:

 In addition, Leidenheimer spent $50,000 on 50 engineering changes with a cost-driver rate of $1,000, and $60,000 on eight outside contracts with a cost driver rate of $7,500.

Required

Management has requested that you do the following:

1. a.      Prepare a traditional income statement.
2. b.      Prepare an activity-based income statement.
3. c.       Write a short report explaining why the activity-based income statement provides useful information to managers. Use the information from requirements (a) and (b) to develop examples for your report.