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
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Prepare an income statement using absorption costing.
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Prepare an income statement using variable costing.
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Determine the managers bonus using each approach. Which approach would you recommend for internal reporting?
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