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Ayala Corporation accumulates the following data relative to jobs started and finished during the...

Question:

Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2017.

Cost and Production Data Actual Standard
Raw materials unit cost $2.25 $2.10
Raw materials units used 10,600 10,000
Direct labor payroll $120,960 $120,000
Direct labor hours worked 14,400 15,000
Manufacturing overhead incurred $189,500
Manufacturing overhead applied $189,000
Machine hours expected to be used at normal capacity 42,500
Budgeted fixed overhead for June $55,250
Variable overhead rate per machine hour $3.00
Fixed overhead rate per machine hour $1.30

Overhead is applied on the basis of standard machine hours. Three hours of machine time are required for each direct labor hour. The jobs were sold for $400,000. Selling and administrative expenses were $40,000. Assume that the amount of raw materials purchased equaled the amount used.

Required:

1. Prepare an income statement for management. (Ignore income taxes.)

Income Statement:

Income Statement is on component of financial statements which presents the results of the operations or company performance during reporting period covered. Income statement contains revenues generated and expenses incurred during the period, regardless of the whether these are already collected or paid.

Answer and Explanation:

1. Prepare an income statement for management. (Ignore income taxes.)

Sales 400,000
Cost of Goods Sold
Raw Materials Used (10,000*2.10) 21,000
Direct Labor 120,000
Variable Overhead (15,000*3*3) 135,000
Fixed Overhead (15,000*3*1.30) 67,500
Total Cost of Goods Sold -343,500
Gross Margin 56,500
Selling and Administrative Expenses -40,000
Net Income 16,500

Learn more about this topic:

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What Is an Income Statement? - Purpose, Components & Format

from Accounting 101: Financial Accounting

Chapter 2 / Lesson 2
45K

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