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The Company X's operating profit report and summary of manufacturing activity presented below. Note that its annual production capacity is 150,000 units, but the business manufactured only 120,000 units during the year. Therefore, it had 20 percent idle capacity (30,000 units not produced ÷ 150,000 units production capacity = 20 percent idle capacity). However, the cost of idle capacity isn't treated as a separate period cost; all the company's fixed manufacturing overhead costs are included in calculating its product cost. Suppose that the business treats the cost of idle capacity as a period cost. Prepare a revised operating profit report and summary of manufacturing activity for the business.
Company X
Per Unit
Totals
Operating Profit Report for Year
Sales volume, in Units
110,000
Sales Revenue
$1,400.00
$154,000,000
Cost of Goods Sold Expense (see below)
-760
-83,600,000
Gross Margin
$640.00
$70,400,000
Variable Operating Expenses
-300
-33,000,000
Contribution Margin
$340.00
$37,400,000
Fixed Operating Expenses
-21,450,000
Operating Profit
$15,950,000
Manufacturing Activity Summary for Year
Annual Production Capacity, in Units
150,000
Actual Output, in Units
120,000
Raw Materials
$215.00
$25,800,000
Direct Labor
125
15,000,000
Variable Manufacturing Overhead Costs
70
8,400,000
Total Variable Manufacturing Costs
$410.00
$49,200,000
Fixed Manufacturing Overhead Costs
350
42,000,000
Product Cost and Total Manufacturing Costs
$760.00
$91,200,000
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