Wallis Company manufactures only one product and uses a standard cost system. The company uses a predetermined plantwide overhead rate that relies on direct labor-hours as the allocation base. All of the company's manufacturing overhead costs are fixedit does not incur any variable manufacturing overhead costs. The predetermined overhead rate is based on a cost formula that estimated $2,899,000 of fixed manufacturing overhead for an estimated allocation base of 289,900 direct labor-hours. Wallis does not maintain any beginning or ending work in process inventory.

The companys beginning balance sheet is as follows:

Wallis Company
Balance Sheet
1/1/XX
(dollars in thousands)
Assets
Cash	$	850
Raw materials inventory		300
Finished goods inventory		420
Property, plant, and equipment, net		10,000
Total assets	$	11,570
Liabilities and Equity
Retained earnings	$	11,570
Total liabilities and equity	$	11,570

The companys standard cost card for its only product is as follows:

Inputs	(1) Standard Quantity or Hours	(2) Standard Price or Rate			Standard Cost (1) (2)
Direct materials	2 pounds	$	33.00	per pound	$	66.00
Direct labor	3.00 hours	$	15.00	per hour		45.00
Fixed manufacturing overhead	3.00 hours	$	10.00	per hour		30.00
Total standard cost per unit					$	141.00

During the year Wallis completed the following transactions:

A) Purchased (with cash) 237,500 pounds of raw material at a price of $31.00 per pound.

B) Added 218,750 pounds of raw material to work in process to produce 96,500 units.

C) Assigned direct labor costs to work in process. The direct laborers (who were paid in cash) worked 248,000 hours at an average cost of $16.00 per hour to manufacture 96,500 units.

D) Applied fixed overhead to work in process inventory using the predetermined overhead rate multiplied by the number of direct labor-hours allowed to manufacture 96,500 units. Actual fixed overhead costs for the year were $2,747,500. Of this total, $1,355,000 related to items such as insurance, utilities, and salaried indirect laborers that were all paid in cash and $1,392,500 related to depreciation of equipment.

E) Transferred 96,500 units from work in process to finished goods.

F) Sold (for cash) 93,500 units to customers at a price of $170 per unit.

G) Transferred the standard cost associated with the 93,500 units sold from finished goods to cost of goods sold.

H) Paid $2,127,500 of selling and administrative expenses.

I ) Closed all standard cost variances to cost of goods sold.

4. Prepare Wallis Companys income statement for the year.

Prepare Wallis Companys income statement for the year. (Enter your dollars in thousands. Round your answers to the nearest whole dollar amount.)

Wallis Company
Income Statement
For the Year Ended 12/31/XX
(dollars in thousands)
Sales		?
Cost of goods sold at standard	?
Total variance adjustments	?
Cost of goods sold		?
Gross margin		?
Selling and administrative expenses		?
Net operating income		?