Rundle Company incurred manufacturing overhead cost for the year as follows. ...
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Accounting
Rundle Company incurred manufacturing overhead cost for the year as follows.
Direct materials
$
39.20
/unit
Direct labor
$
28.00
/unit
Manufacturing overhead
Variable
$
10.40
/unit
Fixed ($18.50/unit for 1,700 units)
$
31,450
Variable selling and administrative expenses
$
9,600
Fixed selling and administrative expenses
$
14,300
The company produced 1,700 units and sold 1,200 of them at $181.70 per unit. Assume that the production manager is paid a 2 percent bonus based on the companys net income.
Required
Prepare an income statement using absorption costing.
Prepare an income statement using variable costing.
Determine the managers bonus using each approach. Which approach would you recommend for internal reporting?
Answer & Explanation
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