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Which amounts were taken to calculate sales revenue in the income statements? Select one: O A. The variable production costs for each type of door are the prices, at which the WDD "sells" to the FD. B. The total costs calculated for each type of door are the prices, at which the WDD "sells" to the FD. O C. The subcontractor's prices offered for each type of door are the prices, at which the WDD "sells" to the FD. OD. The full costs of each type of door plus a profit margin of 6% are the prices, at which the WDD "sells" to the FD. Clear my choice CE The Wooden Door Department ("WD" Dept. or WDD) The Pre factory has a department that makes wooden doors for kitchen units. There are just three basic wooden doors, which, under the new arrangement, the Wooden Door Department (WDD) 'sells' to the Fishing Department (FD) where they are further customised through using different finishes, handles and so on. The Finishing Department (FD) then 'selk' these doors, as well as other sections and components, to the Installation Department (ID), which installs the completed units. Wooden Door Dept (WDD) Finishing Dept (FD) hatallation Dept The "WD" Dept makes the doors using fairly sophisticated machinery, but members of staff are required to prepare sheets of wood to be fed into the machines and then to finish the doors that emerge from the machines on a manual basis. The department hos a manager (Sally Shoh) and four other employees. Under the new arrangements, all five employees are to be paid the same hourly rate of 18 per hour. Sally will ako receive a 'profitability bonus of 10% of the proft of the department for each period. The members of staff all work a 40-hour week (160 hours during each accounting period), but Sally is allowed 10 hours a week (10h4w = 40 hours for each period of those for managerial duties and is therefore only expected to work 30 hours per week on production. This means a period total of 760 direct labour hours, that is (4 x 40 x 4 + 4 x 30). As with other departments, a subcontract price has been sought for the output The WDD makes three door. The total overhead cost for the WDD * 45,600 for each period (all fixed). This Indudes Sally 40 hours of managerial time. The initial product contings were os follows: Door Labour Labour Material Overhead Total Subcontractor's type time cos price COS CON co A 5 mins 1.50 10.00 5.00 16.50 17.50 8 9 mins 270 22.00 19.00 33.70 36.00 12 mins 3.60 25.00 12.00 40.60 145.00 Page 3 of Perlod 1 During the period, the output and costs were as budgeted. The budgeted quantity had been 2,880 Type A doors, 2.400 Type B doors, and 800 Type C doors, to be produced for the Finishing Dept (FD). This led to a profit for the department as follows: WDD Income statement for Period 1 Sales TYA (2,880 17.50) 30,400 Type B (2.400*36.00) 86,400 type C 800 145.00 136.000 172,800 172,800 Labour 60 hours 21B (13,680) Materials Type A2,880 10,00) 128 800) Type/2.400 22.00) 152.800 Type C (80025.00) 20,000) 101.600) (101,600 Overheads 145.600 Profit 11.920 This meant that Sally received a bonus of 1,192 (the 10% of 11,920). Things seemed to be going well for her! Page 4

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