Utease Corporation has many production plants across the midwestern United States. A newly opened plant, the Bellingham plant, produces and sells one product. The plant is treated, for responsibility accounting purposes, as a profit center. The unit standard costs for a production unit, with overhead applied based on direct labor hours, are as follows:
- Manufacturing costs (per unit based on expected activity of 13,000 units or 19,500 direct labor hours):
- Direct materials (2.2 pounds at $20) $ 44
- Direct labor (1.5 hours at $62) 93
- Variable overhead (1.5 hours at $20) 30
- Fixed overhead (1.5 hours at $30) 45
- Standard cost per unit $ 212
- Budgeted selling and administrative costs:
- Variable $ 5 per unit
- Fixed $ 1,000,000
Expected sales activity: 9,000 units at $400 per unit
Desired ending inventories: 10% of sales
Assume this is the first year of operations for the Bellingham plant. During the year, the company had the following activity:
- Units produced 12,000
- Units sold 10,500
- Unit selling price $ 395
- Direct labor hours worked 17,500
- Direct labor costs $ 1,102,500
- Direct materials purchased 30,400 pounds
- Direct material costs $ 608,000
- Direct material used 30,400 pounds
- Actual fixed overhead $ 280,000
- Actual variable overhead $ 290,000Actual selling and administrative costs $ 1,345,000
In addition, all over- or underapplied overhead and all product cost variances are adjusted to cost of goods sold.
1.value:
10.00 points
a.Prepare a production budget for the coming year based on the available standards, expected sales, and desired ending inventories.
b.Prepare a budgeted responsibility income statement for the Bellingham plant for the coming year.
c.Find the direct labor variances. Indicate if they are favorable or unfavorable and why they would be considered as such.
d.Find the direct materials variances (materials price variance and quantity variance).
e.Find the total over- or underapplied (both fixed and variable) overhead. Would cost of goods sold be a larger or smaller expense item after the adjustment for over- or underapplied overhead?