Instant Computing is a contract manufacturer of laptop computers sold under brand named companies. Presented are Instants
Question:
Instant Computing is a contract manufacturer of laptop computers sold under brand named companies. Presented are Instant’s budgeted and actual contribution income statements for October. The company has three responsibility centers: Production, Selling and Distribution, and Administration. Production and Administration are cost centers while Selling and Distribution is a profit center.
Instant Computing Budgeted Contribution Income Statement For Month of October
Sales (1,800*$250)………………………………………………….……$450,000
Less variable costs
Variable cost of goods sold
Direct materials (1,800*$50)…………. $90,000
Direct Labor (1,800*$20)…….………. 36,000
Manufacturing Overhead (1,800*$15)..27,000 $153,000
Selling and Distribution (1,800*$60)………………….... 108,000 (261,000)
Contribution Margin…………………………………….. 189,000
Less Fixed Costs
Manufacturing Overhead………………………..80,000
Selling and Distribution………………………….60,000
Administrative……………………………………21,000 (161,000)
Net Income…………………………………………………. $28,000
Instant Computing Actual Contribution Income Statement For Month of October
Sales (2,500*$275)…………………………………………………………………..… $687,500
Less variable costs
Cost of goods sold
Direct materials………………………$125,000
Direct Labor……………………….. 57,000
Manufacturing Overhead…………48,750 $231,250
Selling and Distribution………………………………….. 188,000 (419,250)
Contribution Margin……………………………………….. 268,250
Less Fixed Costs
Manufacturing Overhead…………………………………78,000
Selling and Distribution…………………………………..75,000
Administrative…………………………………………….43,000 (196,000)
Net Income (loss)……………………………………………………. $72,250
Required
- Prepare a performance report for Production that compares actual and allowed costs.
- Prepare a performance report for Selling and Distribution that compares actual and allowed costs.
- Determine the sales price and the net sales volume variances.
- Prepare a report that summarizes the performance of Selling and Distribution.
- Determine the amount by which Administration was over or under budget.
- Prepare a report reconciling budgeted and actual net income. Your report should focus on the performance of each responsibility center.
Accounting for Decision Making and Control
ISBN: 978-0078025747
8th edition
Authors: Jerold Zimmerman