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Homework answers / question archive / Benson Manufacturing pays its production managers a bonus based on the company’s profitability

Benson Manufacturing pays its production managers a bonus based on the company’s profitability

Accounting

Benson Manufacturing pays its production managers a bonus based on the company’s profitability. During the two most recent years, the company maintained the same cost structure to manufacture its products.

Year Units Produced Units Sold
Production and Sales            
Year 2   4,000     4,000  
Year 3   6,000     4,000  
Cost Data            
Direct materials       $ 14.90 per unit
Direct labor       $ 22.70 per unit
Manufacturing overhead—variable       $ 11.90 per unit
Manufacturing overhead—fixed       $ 97,800  
Variable selling and administrative expenses       $ 8.60 per unit sold
Fixed selling and administrative expenses       $ 58,000  
 

(Assume that selling and administrative expenses are associated with goods sold.)

Benson sells its products for $109.30 per unit.


Required

Task 1: Prepare income statements based on absorption costing for Year 2.

Benson Manufacturing    
Absorption Costing Income Statement     
or the Year Ended Dec. 31, Year 2    
Revenues   $437,200
Cost of Goods Sold: $90,800    
Direct Labor 59,600  
Direct Materials    
Manufacturing overhead    
    55,200
Gross Margin   382,000
Selling and Administrative Expenses    
       
Net Income    

Task 2: Prepare income statements based on absorption costing for Year 3.

Benson Manufacturing    
Absorption Costing Income Statement    
For the Year Ended Dec. 31, Year 2    
Revenues    
Cost of Goods Sold:    
Direct Labor    
Direct Materials     
Manufacturing overhead    
     
Gross Margin    
Selling and Administrative Expenses    
Net Income    
Ending Inventory for Year 3    

Task 3: Determine the costs of ending inventory for Year 3.

Ending Inventory  

Task 4: Prepare income statements based on variable costing for Year 2.

Benson Manufacturing    
Variable Costing Income Statement    
For the Year Ended Dec. 31, Year 3    
Revenues    
Variable Costs:    
Direct Labor    
Direct Materials    
Variable manufacturing overhead      
Variable Selling and administrative expenses    
Contribution Margin    
Fixed manufacturing overhead    
Fixed selling and administrative expenses    
Net Income    

Task 4: Prepare income statements based on variable costing for Year 3.

Benson Manufacturing      
Variable Costing Income Statement    
For the Year Ended Dec. 31, Year 3    
Revenues    
Variable Costs:    
Direct Labor    
Direct Materials    
Variable manufacturing overhead    
Variable Selling and administrative expenses    
Contribution Margin    
Fixed manufacturing overhead    
Fixed selling and administrative expenses    
Net Income

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