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 fixed$$it does not incur any variable manufacturing overhead costs. The predetermined overhead rate is based on a cost formula that estimated $$2,883,000$ of fixed manufacturing overhead for an estimated allocation base of $288,300$ direct labor$-$hours. Wallis does not maintain any beginning or ending work in process inventory.

The company$$s beginning balance sheet is as follows:

Wallis Company

Balance Sheet

$1/1/$XX

$($dollars in thousands$)$

Assets

Cash $ $730$

Raw materials inventory $180$

Finished goods inventory $300$

Property, plant, and equipment, net $8,800$

Total assets $ $10,010$

Liabilities and Equity

Retained earnings $ $10,010$

Total liabilities and equity $ $10,010$

The company$$s standard cost card for its only product is as follows:

Inputs $(1)$

Standard Quantity or Hours $(2)$

Standard Price or Rate Standard Cost

$(1)\backslash$times $(2)$

Direct materials $2$ pounds $ $30\mathrm{.}60$ per pound $ $61\mathrm{.}20$

Direct labor $3\mathrm{.}00$ hours $ $15\mathrm{.}00$ per hour $45\mathrm{.}00$

Fixed manufacturing overhead $3\mathrm{.}00$ hours $ $10\mathrm{.}00$ per hour $30\mathrm{.}00$

Total standard cost per unit $ $136\mathrm{.}20$

During the year Wallis completed the following transactions:

Purchased $($with cash$)231,500$ pounds of raw material at a price of $$29\mathrm{.}80$ per pound.

Added $215,750$ pounds of raw material to work in process to produce $95,300$ units.

Assigned direct labor costs to work in process. The direct laborers $($who were paid in cash$)$ worked $245,600$ hours at an average cost of $$16\mathrm{.}00$ per hour to manufacture $95,300$ units.

Applied fixed overhead to work in process inventory using the predetermined overhead rate multiplied by the number of direct labor$-$hours allowed to manufacture $95,300$ units. Actual fixed overhead costs for the year were $$2,741,500.$ Of this total, $$1,343,000$ related to items such as insurance, utilities, and salaried indirect laborers that were all paid in cash and $$1,398,500$ related to depreciation of equipment.

Transferred $95,300$ units from work in process to finished goods.

Sold $($for cash$)92,300$ units to customers at a price of $$170$ per unit.

Transferred the standard cost associated with the $92,300$ units sold from finished goods to cost of goods sold.

Paid $$2,121,500$ of selling and administrative expenses.

Closed all standard cost variances to cost of goods sold.

Required:

$1.$ Compute all direct materials, direct labor, and fixed overhead variances for the year.

Materials price variance:

Materiuals quantity variance:

$($Indicate the effect of each variance by selecting $"$F$"$ for favorable, $"$U$"$ for unfavorable, and "None" for no effect $($i$.$e$.,$ zero variance$).$ Input all amounts as positive

$2.$ Record transactions a through i for Wallis Company.

$3.$ Compute the ending balances for Wallis Company$$s balance sheet.

$4.$ Prepare Wallis Company$$s income statement for the year.