Jamcor Corporation has several production plants nationwide. A newly opened plant in Warasaw produces and sells one product. The plant is a profit center. The unit standard costs for a production unit, with overhead applied based on direct labor hours, are as follows.

Manufacturing costs (per unit based on expected activity of 18,000 units or 36,000 direct labor hours):

Direct Materials (2.5 pounds at $10) $25.00

Direct Labor (2.0 hours at $40) $80.00

Variable Overhead (2.0 hours at $25) $50.00

Fixed Overhead (2.0 hours at $35)$70.00

Standard Cost per unit $225.00

Budgeted Selling and Administrative Costs

Variable $4 per unit

Fixed $1,5000,000

Expected sales activity: 14,000 units at $380 per unit

Desired ending inventories: 12% of sales

This is the first year of operations for the Warasaw plant. During the year, the company had the following activity.

Units Produced 17,000Units

Sold 15,500Unit

Selling Price $375

Direct Labor Hour worked 33,500

Direct Labor Costs $1,373,500

Direct Materials Purchased 46,500 pounds

Direct Materials Costs $465,000

Direct Materials used 46,500 pounds

Actual Fixed Overhead $ 1,000,000

Actual Variable Overhead $800,000

Actual Selling and Administrative Costs $1,756,000

1. A. Find the Direct Labor Variances and indicate if they are favorable or unfavorable.

• Labor Efficiency Variance
• Labor Rate Variance

1. B. Find the direct materials variances (materials price variance and quantity variance).

• Material Quantity Variance
• Material Price Variance

1. C. Find the total over- or underapplied (both fixed and variable) overhead

• Would cost of goods sold be larger or smaller expense item?

1. D. Calculate

• actual plant operating profit for the year
• ROI
• ROS
• Capital Turnover

1. E. Should the manager invest 600,000 in new equipment if this investment generated incremental earnings of 80,000/year?