Question
Utease Corporation has many production plants across the midwestern United States. A newly opened plant, the Bellingham plant, produces and sells one product. The plant
Utease Corporation has many production plants across the midwestern United States. A newly opened plant, the Bellingham plant, produces and sells one product. The plant is treated, for responsibility accounting purposes, as 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 19,000 units or 39,900 direct labor hours): | |||
Direct materials (2.6 pounds at $10) | $ | 26 | |
Direct labor (2.1 hours at $60) | 126 | ||
Variable overhead (2.1 hours at $10) | 21 | ||
Fixed overhead (2.1 hours at $20) | 42 | ||
| | ||
Standard cost per unit | $ | 215 | |
| | ||
Budgeted selling and administrative costs: | |||
Variable | $ | 4 | per unit |
Fixed | $ | 1,500,000 | |
|
Expected sales activity: 15,000 units at $380 per unit |
Desired ending inventories: 12% of sales |
Assume this is the first year of operations for the Bellingham plant. During the year, the company had the following activity: |
Units produced | 18,000 | ||
Units sold | 16,500 | ||
Unit selling price | $ | 375 | |
Direct labor hours worked | 37,300 | ||
Direct labor costs | $ | 2,275,300 | |
Direct materials purchased | 50,800 | pounds | |
Direct material costs | $ | 508,000 | |
Direct material used | 50,800 | pounds | |
Actual fixed overhead | $ | 1,000,000 | |
Actual variable overhead | $ | 299,000 | |
Actual selling and administrative costs | $ | 1,660,000 | |
|
In addition, all over- or underapplied overhead and all product cost variances are adjusted to cost of goods sold |
a. | Prepare a production budget for the coming year based on the available standards, expected sales, and desired ending inventories. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)
| c. |
d.Find the direct materials variances (materials price variance and quantity variance). (Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting Favorable, Unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Enter your answers in dollars not in pounds. Omit the "$" sign in your response.)
e-1 | Find the total over- or underapplied (both fixed and variable) overhead. Would cost of goods sold be a larger or smaller expense item after the adjustment for over- or underapplied overhead? (Omit the "$" sign in your response.) |
f. | Calculate the actual plant operating profit for the year. (Omit the "$" sign in your response.)
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