Wall's 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 companys 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 $2,890,000 of fixed manufacturing overhead for an estimated allocation base of 289.000 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 (dollars in thousands) Assets Cash Raw materials inventory Finished goods inventory Property, plant, and equipment, net Total assets Liabilities and Equity Retained earnings $ 800 250 ce 9,500 $10,920 $10, 920 rotal liabilities and equity $10,920 The company's standard cost card for its only product is as follows: Standard Quantity Price or Hours or Rate(1)(2) 2 pounds $32.00 per Standard Standard cost Inputs Direct materials Direct labor 42.00 30.00 $136.00 hour Fixed manufacturing overhead rotal standard cost per unit hours $10.00 Per During the year Wallis completed the following transactions a. Purchased (with cash) 235,000 pounds of raw material at a price of $30.50 per pound. b. Added 217,500 pounds of raw material to work in process to produce 96,000 units. c. Assigned direct labor costs to work in process. The direct laborers (who were paid in cash) worked 247000 hours at an average cost of $16.00 per hour to manufacture 96,000 units. d. Applied fxed overhead to work in process inventory using the predetermined overhead rate multiplied by the number of direct labor-hours allowed to manufacture9 $2,745,000. Of this total, $1,350,000 related to items such as insurance, utilities, and salaried indirect laborers that were all paid in cash and $1,395,000 related to depreciation of equipment. e. Transferred 96,000 units from work in process to finished goods for cesh) 93,000 units to customers at a price of $170 per unit. g. Transferred the standerd cost associated with the 93,000 units sold from finished goods to cost of goods sold h. Paid $2,125,000 of selling and administrative expenses t. Closed all standard cost variances to cost of goods sold. Required: 1 Compute all direct materials, direct lobor, and fixed overheed variances for the year 2. Record transactions a through ifor Wallis Company 3. Compute the ending balances for Wallis Company's balance sheet 4. Prepare Wall's Company's income statement for the year
