Question

Tri-State Mill uses a special sander to finish lumber. Data on the sander and its usage follow. Cost Driver Rate Cost Driver Volume Resources used Energy $ 0.50 per machine-hour 8,000 machine-hours Repairs $ 13 per job 800 jobs Resources supplied Energy $ 7,600 Repairs $ 12,700 Sales revenue from finishing totaled $37,000. Required: a. Prepare a traditional income statement. b. Prepare an activity-based income statement.

Answer 1

Solution:

a. To Prepare a traditional income statement.

Finishing Sales                                            37,000.00

Energy Costs                         7,600.00

Repair Costs                         12,700.00

                                                                    20,300.00

Operating Profit                                            16,700.00

b. To Prepare an activity-based income statement.

                         Resources Used   Unused Resources  Resources Supplied

Finishing Sales                                                                                37,000.00

Costs

Volume Related Energy   4,500                3,000           7,600.00

Batch Related Repairs     10,500             2,100.00        12,700.00

Total Costs                       15,000                5,100           20,100.00   20,100.00

Finishing Operating Profits                                                                 15,900.00