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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 23,000 units or 57,500 direct labor hours):

Direct materials (3.0 pounds at $20) $ 60.00
Direct labor (2.5 hours at $90) 225.00
Variable overhead (2.5 hours at $30) 75.00
Fixed overhead (2.5 hours at $40) 100.00
Standard cost per unit $ 460.00
Budgeted selling and administrative costs:
Variable $ 10 per unit
Fixed $ 1,400,000

Expected sales activity: 19,000 units at $550 per unit

Desired ending inventories: 14% 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 22,000
Units sold 20,500
Unit selling price $ 545
Direct labor hours worked 54,500
Direct labor costs $ 4,959,500
Direct materials purchased 70,000 pounds
Direct materials costs $ 1,400,000
Direct materials used 70,000 pounds
Actual fixed overhead $ 1,200,000
Actual variable overhead $ 1,625,000
Actual selling and administrative costs $ 2,590,000

In addition, all over- or underapplied overhead and all product cost variances are adjusted to cost of goods sold.

Required:

a. Prepare a production budget for the coming year based on the available standards, expected sales, and desired ending inventories.

b. Prepare a budgeted responsibility income statement for the Bellingham plant for the coming year.

c. Find the direct labor variances. Indicate if they are favorable or unfavorable. (Indicate the effect of each variance by selecting Favorable, Unfavorable, and "None" for no effect.)

d. Find the direct materials variances (materials price variance and quantity variance). (Indicate the effect of each variance by selecting Favorable, Unfavorable, and "None" for no effect (i.e., zero variance). Enter your answers in dollars not in pounds.)

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

e-2. Would cost of goods sold be a larger or smaller expense item after the adjustment for over- or underapplied overhead?

f. Calculate the actual plant operating profit for the year.

h. Assume Utease Corporation is planning to change its evaluation of business operations in all plants from the profit center format to the investment center format. If the average invested capital at the Bellingham plant is $9,190,000, compute the return on investment (ROI) for the first year of operations. Use the DuPont method of evaluation to compute the return on sales (ROS) and capital turnover (CT) for the plant. (Round your answers to 2 decimal places.)

i. Assume that under the investment center evaluation plan the plant manager will be awarded a bonus based on ROI. If the manager has the opportunity in the coming year to invest in new equipment for $600,000 that will generate incremental earnings of $75,000 per year, would the manager undertake the project?

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