Knipple Woodworking Corporation Produces Fine Cabinets

Essay

Knipple Woodworking Corporation produces fine cabinets. The company uses a job-order costing system in which its predetermined overhead rate is based on capacity. The capacity of the factory is determined by the capacity of its constraint, which is an automated bandsaw. Additional information is provided below for the most recent month:
Required:
Prepare an income statement following the Example in Appendix 3B in which any cost of unused capacity is directly recorded on the income statement as a period expense.