How would Company Y's operating profit report and summary of manufacturing activity be revised if the cost of idle capacity is treated as a period cost in the year?
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Company Y
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Company Z
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Operating Profit Report for Year
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Per Unit
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Totals
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Per Unit
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Totals
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Sales volume, in Units
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500,000
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2,000,000
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Sales Revenue
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$85.00
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$42,500,000
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$25.00
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$50,000,000
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Cost of Goods Sold Expense (see below)
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-56
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-28,000,000
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-18.45
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-36,900,000
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Gross Margin
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$29.00
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$14,500,000
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$6.55
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$13,100,000
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Variable Operating Expenses
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-12.5
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-6,250,000
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-2.5
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-5,000,000
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Contribution Margin
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$16.50
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$8,250,000
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$4.05
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$8,100,000
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Fixed Operating Expenses
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-5,000,000
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-7,500,000
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Operating Profit
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$3,250,000
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$600,000
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Manufacturing Activity Summary for Year
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Per Unit
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Totals
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Per Unit
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Totals
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Annual Production Capacity, in Units
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800,000
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2,500,000
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Actual Output, in Units
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500,000
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2,500,000
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Raw Materials
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$15.00
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$7,500,000
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$7.50
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$18,750,000
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Direct Labor
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20
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10,000,000
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2.75
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6,875,000
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Variable Manufacturing Overhead Costs
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5
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2,500,000
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5
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12,500,000
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Total Variable Manufacturing Costs
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$40.00
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$20,000,000
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$15.25
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$38,125,000
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Fixed Manufacturing Overhead Costs
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16
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8,000,000
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3.2
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8,000,000
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Product Cost and Total Manufacturing Costs
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$56.00
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$28,000,000
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$18.45
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$46,125,000
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