Activity Based Reporting: Manufacturing
Leidenheimer Corporation manufactures small airplane propellers. Sales for year 2 totaled $1,700,000. Information regarding resources for the month follows:
|
|
Resources Used |
Resources Supplied |
|
Parts management |
$ 60,000 |
$ 70,000 |
|
Energy |
100,000 |
100,000 |
|
Quality inspections |
90,000 |
100,000 |
|
Long term labor |
50,000 |
70,000 |
|
Short term labor |
40,000 |
48,000 |
|
Setups |
140,000 |
200,000 |
|
Materials |
300,000 |
300,000 |
|
Depreciation |
120,000 |
200,000 |
|
Marketing |
140,000 |
150,000 |
|
Customer service |
20,000 |
40,000 |
|
Administrative |
100,000 |
140,000 |
In addition, Leidenheimer spent $50,000 on 50 engineering changes with a cost driver rate of $1,000 and $60,000 on eight outside contracts with a cost driver rate of $7,500.
Required
Management has requested that you do the following:
a. Prepare a traditional income statement.
b. Prepare an activity based income statement.
c. Write a short report explaining why the activity based income statement provides useful information to managers. Use the information from requirements (a) and (b) to develop examples for your report.