05 Jun Question MTI makes three types of lawn tra
Question
MTI makes three types of lawn tractors: M3100, M4100, and M6100. In the past, it allocated overhead to products using machine-hours. Last year, the company produced 11,000 units of M3100, 18,000 units of M4100, and 8,000 units of M6100 and had the following revenues and costs: MTI Income Statement M3100 M4100 M6100 Total Sales revenue $ 8,600,000 $ 15,400,000 $ 13,800,000 $ 37,800,000 Direct costs Direct materials 2,900,000 4,300,000 3,000,000 10,200,000 Direct labor 560,000 860,000 1,860,000 3,280,000 Variable overhead Setting up machines 2,585,000 Processing sales orders 1,659,000 Warehousing 2,560,000 Operating machines 1,150,000 Shipping 999,000 Contribution margin $ 15,367,000 Plant administration 6,400,000 Gross profit $ 8,967,000 MTI’s controller has heard about activity-based costing and puts to gether an employee team to recommend cost allocation bases. The employee team recommends the following: Activity Cost Driver M3100 M4100 M6100 Setting up machines Production runs 12 22 21 Processing sales orders Sales orders received 190 390 210 Warehousing Units held in inventory 100 190 110 Operating machines Machine-hours 6,100 9,300 9,600 Shipping Units shipped 8,000 18,000 11,000 The employee team recommends that plant administration costs not be allocated to products. Required: (a) Using machine-hours to allocate overhead, complete the income statement for MTI. Do not allocate plant administrative costs to products. (Do not round intermediate computations.) (b) Complete the income statemen
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