Problem 8-35A (Part Level Submission)

The Daniels Tool & Die Corporation has been in existence for a little over three years. The companys sales have been increasing each year as it builds a reputation. The company manufactures dies to its customers specifications and therefore uses a job-order cost system. Factory overhead is applied to the jobs based on direct labour hoursthe absorption-costing (full) method. Overapplied or underapplied overhead is treated as an adjustment to Cost of Goods Sold. The companys income statements and other data for the last two years are as follows:

DANIELS TOOL & DIE CORPORATION 20152016 Comparative Income Statements
			2015		2016
Sales			$833,700		$1,015,800
Cost of goods sold
	Finished goods, January 1		24,800		17,400
	Cost of goods manufactured		548,100		654,100
	Total available		572,900		671,500
	Finished goods, December 31		17,400		14,000
	Cost of goods sold before overhead adjustment		555,500		657,500
	Underapplied factory overhead		35,500		14,300
Cost of goods sold			591,000		671,800
Gross profit			242,700		344,000
Selling expenses			81,700		94,700
Administrative expenses			69,000		74,000
	Total operating expenses		150,700		168,700
Operating income			$92,000		$175,300

Daniels Tool & Die Corporation Inventory Balances
		January 1, 2015			December 31, 2015			December 31, 2016
Raw material		$21,400			$29,800			$11,000
Work in process		$40,400			$48,000			$63,500
Direct labour hours (used in WIP)		1,330			1,640			2,200
Finished goods		$24,800			$17,400			$14,000
Direct labour hours (used in FG)		1,520			1,040			830

Daniels used the same predetermined overhead rate in applying overhead to its production orders in both 2015 and 2016. The rate was based on the following estimates:

Fixed factory overhead		$24,750
Variable factory overhead		$153,450
Direct labour hours (used in WIP)		24,750
Direct labour costs (used in FG)		$148,500

In 2015 and 2016, the actual direct labour hours used were 20,700 and 23,300, respectively. Raw materials put into production were $291,900 in 2015 and $370,000 in 2016. The actual fixed overhead was $42,800 for 2015 and $29,640 for 2016, and the planned direct labour rate was the direct labour achieved. For both years, all of the administrative costs were fixed. The variable portion of the selling expenses results from a 5% commission that is paid as a percentage of the sales revenue.

Question: Fill in the blank, thank you!

What time are you refering to?

(b) Reconcile the difference in operating income between Daniels Tool & Die Corporation's 2016 absorption-costing income statement and the revised 2016 income statement prepared under variable costing. (Round answers to 0 decimal places, e.g. 5,275.) Variable costing operating income FMOH deferred in work in process Inventory FMOH released from finished goods inventory Absorption costing operating income