Year 3 Manufacturing costs (per unit based on expected activity of 2,680 units o
ID: 2381349 • Letter: Y
Question
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
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
In addition, all over- or under applied overhead and all product cost variances are adjusted to cost of goods sold.
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
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