Question:
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.