Question

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 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 Raw materials inventory Finished goods inventory Property, plant, and equipment, net Total assets Liabilities and Equity Retained earnings Total liabilities and equity $ 790 240 360 9,400 $10,790 $ 10,790 $10,790 The company's standard cost card for its only product is as follows: Inputs Direct materials Direct labor Fixed manufacturing overhead Total standard cost per unit (1) (2) Standard Standard Quantity Price or Hours or Rate 2 pounds $31.80 per pound 3.00 hours $ 15.00 per hour 3.00 hours $ 10.00 per hour Standard Cost (1) X (2) $ 63.60 45.00 30.00 $138.60

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