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 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:
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.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started