Reference no: EM132634290

Wixis Cabinets makes custom wooden cabinets for high-end stereo systems from specialty woods. The company uses ajob-order costing system. The capacity of the plant is determined by the capacity of its constraint, which is time on the automated bandsaw that makes finely beveled cuts in wood according to the preprogrammed speci?cations of each cabinet. The bandsaw can operate up to 182 hours per month. The estimated total manufacturing overhead cost at capacity is $14,560 per month. The company bases its predetermined overhead rate on capacity, so its predetermined overhead rate is $80 per hour of bandsaw use.

The results of a recent month's operations appear below:

sales $43,730

Beginning inventories $ 0

Ending inventories $ 0

Direct materials 5 5,300

Direct labor $ 8,900

Manufacturing overhead incurred $14,260

Selling and administrative expense $ 8,160

Actual hours of bandsaw use 152

Required:

Question 1: Prepare an income statement for the month. Your income statement should include the cost of unused capacity as a period expense.

Question 2: What was the cost of unused capacity during the month?