(I will give you more than 1500 points if possible.) Fallacy Corporation Belling

Question

(I will give you more than 1500 points if possible.)

Fallacy Corporation

Bellingham Plant Operations

The Fallacy Corporation has many production plants across the Midwestern United States. The company uses FIFO for valuing inventories for all purposes. 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:

Year 1

Manufacturing costs (per unit based on expected activity of 2,400 units or 3,600 direct labor hours):

Direct materials (2 pounds at $20) . . . . . . . . . . . . . . . . . . . . . . . . .  . . . .  $ 40.00

Direct labor (1.5 hours at $90) . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . .     135.00

Variable overhead (1.5 hours at $20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30.00

Fixed overhead (1.5 hours at $30) . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . .    45.00

Standard cost per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . .   $250.00

Budgeted selling and administrative costs:

Variable . . . . . . . . . . . . .  . . . . ..  . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 5 per unit

Fixed . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . .    $140,000

Expected sales activity: 2,000 units at $450.00 per unit

Beginning Inventory 0 units

Desired ending inventories: 10% of sales for next year

Year 2

Manufacturing costs (per unit based on expected activity of 2,750 units or 4,125 direct labor hours):

Direct materials (2 pounds at $22) . . . . . . . . . . . . . . . . . . . . . .  . . . . . . .    $ 44.00

Direct labor (1.5 hours at $95) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . .  142.50

Variable overhead (1.5 hours at $24) . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 36.00

Fixed overhead (1.5 hours at $30) . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . .   45.00

Standard cost per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . .    $267.50

Budgeted selling and administrative costs:

Variable  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . .    $6 per unit

Fixed . . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      $145,000

Expected sales activity: 2,600 units at $495.00 per unit

Desired ending inventories: 10% of sales for next year

Year 3

Manufacturing costs (per unit based on expected activity of 2,680 units or 4,020 direct labor hours):

Direct materials (2 pounds at $23) . . . . . . . . . . .  . . . . . . . . . . . . . . . . .. . . .    $ 46.00

Direct labor (1.5 hours at $100) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     150.00

Variable overhead (1.5 hours at $28) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .      42.00

Fixed overhead (1.5 hours at $30) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       45.00

Standard cost per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $283.00

Budgeted selling and administrative costs:

Variable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      $ 6 per unit

Fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . .      $155,000

Expected sales activity: 2,700 units at $525.00 per unit

Desired ending inventories: 10% of sales for next year, Year 4 Projected Sales 2,780 units

Assume this is the first year of operation for the Bellingham plant. During the first year, the company had the following activity

Units produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     2,400

Units sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       2,050

Unit selling price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      $445

Direct labor hours worked . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3200

Direct labor costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .   $285,000

Direct materials purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      4,400 pounds

Direct materials costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              $89,000

Direct materials used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      4,400 pounds

Actual fixed overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       $142,000

Actual variable overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   $65,000

Actual selling and administrative costs . . . . . . . . . . . . . . . . . . . . . . .       $162,500

In addition, all over- or under applied overhead and all product cost variances are adjusted to cost of goods sold.

Bellingham Year 2

Units produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             2,650

Units sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              2,700

Unit selling price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             $498

Direct labor hours worked . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        4,000

Direct labor costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       $368,000

Direct materials purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          5,400 pounds

Direct materials costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     $110,000

Direct materials used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               5350 pounds

Actual fixed overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               $143,000

Actual variable overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       $95,000

Actual selling and administrative costs . . . . . . . . . . . . . . . . . . . . . . .             $205,000

Bellingham Year 3

Units produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             3,000

Units sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               2,950

Unit selling price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             $530

Direct labor hours worked . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         4,650

Direct labor costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        $465,000

Direct materials purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          6,250 pounds

Direct materials costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     $143,750

Direct materials used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              6,250 pounds

Actual fixed overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               $144,000

Actual variable overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $122,000

Actual selling and administrative costs . . . . . . . . . . . . . . . . . . . . . . .             $245,000

Instructions

a. Prepare a production budget for each year based on the available standards, expected sales, and desired ending inventories.

b. Prepare a budgeted income statement for the Bellingham plant for each year.

c. Find the direct labor variances (activity and spending) for each year. 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) for each year.  Indicate if they are favorable or unfavorable and why they would be considered as such.

e. Find the total over- or under applied (both fixed and variable) overhead. Would cost

of goods sold be a larger or smaller expense item each year after the adjustment for over- or under applied overhead?

f. Explain the difference between the budgeted operating profit and the actual operating

profit for the Bellingham plant for its years of operation. What part of the difference

do you believe is the plant manager

Explanation / Answer

I have solved the question for year 1 and year 2and I'm uploading the solution in .doc format in google drive.

Here is the link

https://drive.google.com/file/d/0B3c3IX_OQxwgTm9zYVV1MFk2dVE/edit?usp=sharing

Check this

Related Questions

Navigate

• Browse (All)
• Browse #
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.