Question

Pepper's Products manufactures and sells two types of chew toys for pets-Squeaky and Silent. In May, Pepper's Products had the following costs and revenues. Pepper's Products Income Statement For the Month of May Squeaky silent Total Sales revenue $143,000 $157,000 $300,000 Direct 19,000 18,000 37,000 materials Direct labor 70,000 30,000 100,000 Overhead coats Administration 20,000 Production 45,000 setup Quality 20,000 control Distribution 22,000 Operating $ 56,000 profit Pepper's Products currently uses labor costs to allocate all overhead but is considering implementing an activity-based costing system. After interviewing the sales and production staff, management decides to allocate administrative costs on the basis of direct labor costs but to use the following bases to allocate the remaining overhead. Activity Setting up Performing quality control Distribution Activity Level Cost Driver Squeaky Silent Number of production runs 10 20 Number of inspections 40 40 Number of units shipped 90,000 130,000 Required: a. Complete the income statement using the preceding activity bases. c. Restate the income statement for Pepper's Products using direct labor costs as the only overhead allocation base. Complete this question by entering your answers in the tabs below. Required Required A Complete the income statement using the preceding activity bases. (Do not round intermediate calculations. Input all amounts as positive values.) Account Squeaky Silent Total Sales revenue $ 143,000 $ 157,000 $ 300,000 Direct materials 19,000 18,000 37,000 Direct labor 70,000 30,000 100,000 Overhead costs: Administration 20,000 Setting up 45,000 Performing quality control 20,000 Distribution 22,000 Total overhead costs 0 Operating profit loss) $ 54,000 $ 109,000 S 163,000 Required A Required C >