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 $2,886,000 of fixed manufacturing overhead for an estimated allocation base of 288,600 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 | $ | 760 |
Raw materials inventory | 210 | |
Finished goods inventory | 330 | |
Property, plant, and equipment, net | 9,100 | |
Total assets | $ | 10,400 |
Liabilities and Equity | ||
Retained earnings | $ | 10,400 |
Total liabilities and equity | $ | 10,400 |
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) × (2) |
||||
Direct materials | 2 pounds | $ | 31.20 | per pound | $ | 62.40 | |
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 | $ | 137.40 | |||||
During the year Wallis completed the following transactions:
Required:
1. Compute all direct materials, direct labor, and fixed overhead variances for the year.
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.
ANSWER
Material Variance | Labor Variance | |||||
Standard Material Price | $ 31.20 | SP | Standard Hour Rate | $ 15.00 | ||
Standard Quantity | 95600*2 | 191200 | SQ | Standard Hour | 95600*3 | 286800 |
Actual Quantity Purchased | 233000 | AQ | Actual Hours | 246200 | ||
Actual Quantity used | 216500 | AQ | 246200 | |||
Actual Matrial Price | $ 30.10 | AP | Actual Hour Rate | $ 16.00 | ||
Material Price Variance | AQ(AP-SP) | Labor Rate Variance | AH(AR-SR) | |||
$ -256,300 | F | $ 246,200 | U | |||
Material Quantity Variance | SP(AQ-SQ) | Labor Efficiency Variance | SR(AH-SH) | |||
$ 789,360 | U | $ -609,000 | F | |||
Actual Cost Incurred | $ 2,743,000 | a | ||||
Static Budget | $ 2,886,000 | b | ||||
Budgeted Input For Actual Output*Budgeted Rate | 95600*3*10 | $ 2,868,000 | c | |||
Spending Variance | a-b | $ 143,000 | F | |||
Production Volume Variance | b-c | $ -18,000 | F | |||
Account | Debit | Credit | ||||
Raw Material Inventory | $ 7,013,300 | |||||
Cash | $ 7,013,300 | |||||
Work in Process Inventory | $ 6,516,650 | |||||
Raw Material Inventory | $ 6,516,650 | |||||
Work in Process Inventory | $ 3,939,200 | |||||
Wages | $ 3,939,200 | |||||
Work in Process Inventory | $ 2,868,000 | |||||
Factory Overhead (95600*3*10) | $ 2,868,000 | |||||
Factory Overhead | $ 2,743,000 | |||||
Cash | $ 1,346,000 | |||||
Accumulated Depreciation | $ 1,397,000 | |||||
Finished Goods Inventory | $ 13,323,850 | |||||
Work in Process Inventory | $ 13,323,850 | |||||
Cash | $ 15,742,000 | |||||
Sales Revenue | $ 15,742,000 | |||||
Cost of Goods Sold (13323850/95600*92600) | $ 12,905,738 | |||||
Finished Goods Inventory | $ 12,905,738 | |||||
Selling and Administrative Expense | $ 2,123,000 | |||||
Cash | $ 2,123,000 | |||||
Cost of Goods Sold: | ||||||
Beginning, Finished Goods | $ 330,000 | |||||
Cost of Goods Manufactured: | ||||||
Direct Material, Beginning | $ 210,000 | |||||
Add: Purchase | $ 7,013,300 | |||||
Less: Direct Material, Ending | $ -706,650 | |||||
Direct Material Cost | $ 6,516,650 | |||||
Direct Labor | $ 3,939,200 | |||||
Overhead-Applied | $ 2,868,000 | |||||
Cost of Goods Manufactured: | $ 13,323,850 | |||||
Cost of Goods Available | $ 13,653,850 | |||||
Less: Finished Goods, Ending | $ 748,112 | |||||
Cost of Goods Sold | $ 12,905,738 | |||||
Income Statement: | ||||||
Sales | $ 15,742,000 | |||||
Less: Cost of Goods Sold | $ 12,905,738 | |||||
Add: Overapplied Overhead | $ 125,000 | |||||
Gross Margin | $ 2,961,262 | |||||
Less: Selling and Admin | $ 2,123,000 | |||||
Net Income | $ 838,262 |
Raw Material Inventory | |||
Debit | Credit | ||
Beginning | $ 210,000 | b | $ 6,516,650 |
a | $ 7,013,300 | ||
Ending | $ 706,650 | ||
Finished Goods Inventory | |||
Debit | Credit | ||
Beginning | $ 330,000 | h | $12,905,738 |
f | $13,323,850 | ||
Ending | $ 748,112 | ||
Cash | |||
Debit | Credit | ||
Beginning | $ 760,000 | a | $ 7,013,300 |
g | $15,742,000 | e | $ 1,346,000 |
i | $ 2,123,000 | ||
Ending | $ 6,019,700 | ||
Work in process Inventory | |||
Debit | Credit | ||
b | $ 6,516,650 | f | $13,323,850 |
c | $ 3,939,200 | ||
d | $ 2,868,000 | ||
Factory Overhead | |||
Debit | Credit | ||
e | $ 1,346,000 | d | $ 2,868,000 |
e | $ 1,397,000 | ||
Overapplied | $ 125,000 |
Cash | RM | WIP | Finished Goods | PPE | = | MPV | MQV | LRV | LEV | FOB | FOV | Retained Earning | ||
1/1 | $ 760,000 | $ 210,000 | $ 330,000 | $ 9,100,000 | $ 10,400,000 | |||||||||
a | $ -7,013,300 | $ 7,013,300 | $-256,300 | |||||||||||
b | $ -6,516,650 | $ 6,516,650 | $-789,360 | |||||||||||
c | $ 3,939,200 | $ -246,200 | $ -609,000 | $ 3,939,200 | ||||||||||
d | $ 2,868,000 | $ 2,868,000 | ||||||||||||
e | $ -1,346,000 | $ -1,397,000 | $ 143,000 | $ 18,000 | $ -2,743,000 | |||||||||
f | $-13,323,850 | $ 13,323,850 | $ - | |||||||||||
g | $ 15,742,000 | $ 15,742,000 | ||||||||||||
h | $ -12,905,738 | $ -12,905,738 | ||||||||||||
i | $ -2,123,000 | $ -2,123,000 | ||||||||||||
Variance Adjustment to COGS | $ 256,300 | $ 789,360 | $ 246,200 | $ 609,000 | $ -143,000 | $ -18,000 | ||||||||
$ 6,019,700 | $ 706,650 | $ - | $ 748,112 | $ 7,703,000 | $ - | $ - | $ - | $ - | $ - | $ - | $ 15,177,462 |
_____________________________________________
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Wallis Company manufactures only one product and uses a standard cost system. The company uses a...
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 $2,919,000 of fixed manufacturing overhead for an estimated allocation base of 291,900 direct labor-hours. Wallis does not maintain any beginning or ending...
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 $2,894,000 of fixed manufacturing overhead for an estimated allocation base of 289,400 direct labor-hours. Wallis does not maintain any beginning or ending...
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 $2,884,000 of fixed manufacturing overhead for an estimated allocation base of 288,400 direct labor-hours. Wallis does not maintain any beginning or ending...
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 $2,889,000 of fixed manufacturing overhead for an estimated allocation base of 288,900 direct labor-hours. Wallis does not maintain any beginning or ending...
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 $2,884,000 of fixed manufacturing overhead for an estimated allocation base of 288,400 direct labor-hours. Wallis does not maintain any beginning or ending...
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 $2,899,000 of fixed manufacturing overhead for an estimated allocation base of 289,900 direct labor-hours. Wallis does not maintain any beginning or ending...
Help please ! 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 baseed on a cost formula that estimated $2,882,000 of fixed manufacturing overhead for an estimated allocation base of 288,200 direct labor-hours. Wallis does not maintain any...
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 $2,882,000 of fixed manufacturing overhead for an estimated allocation base of 288,200 direct labor-hours. Wallis does not maintain any beginning or ending...
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 $2,893,000 of fixed manufacturing overhead for an estimated allocation base of 289,300 direct labor-hours. Wallis does not maintain any beginning or ending...
**PLEASE SHOW WORK, THANK YOU. 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 $2,889,000 of fixed manufacturing overhead for an estimated allocation base of 288,900 direct labor-hours. Wallis does not...