Check my work Wallis Company manufactures only one product and uses a standard c

Question

Check my work 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 work in process inventory 14.28 points The company's beginning balance sheet is as follows: Print Wallis Company Balance Sheet (dollars in thousands) Assets Cash Raw materials inventory Finished goods inventory Property, plant, and equipment, net Total assets $ 890 340 460 10,400 $12,090 Liabilities and Equity Retained earnings Total liabilities and equity $12,090 $12, 09 The company's standard cost card for its only product is as follows: Standard Quantity or Hours Standard Price or Rate Standard Cost Inputs Direct materials Direct labor Fixed manufacturing overhead Total standard cost per unit 2 pounds$ 33.80 per pound 3.00 hours 14.00 per hour 3.00 hours 10.00 per hour 67.60 42.00 30.00 $139.60 Mc

Explanation / Answer

1. a. Material Price Variance = (Standard Rate per unit of RM - Actual rate per unit of RM) x Actual Quantity used

Standard Rate = $33.80 per pound

Actual Rate = $31.40 per pound

Actual Quantity Purchased = 239,500 pounds

Material Price Variance = (33.80 - 31.40) x 239,500 = $574,800 Favorable

b. Material Quantity Variance = (Standard quantity of RM required for actual output - Actual Quantity used) x Standard rate per unit of RM

Standard Quantity of RM required = Actual Units produced x Standard quantity required

= 96,900 units x 2 pounds = 193,800 pounds

Actual Quantity used = 219,750 pounds

Standard Rate = $33.80 per pound

Material Quantity Variance = (193,800 - 219,750) x $33.80 per pound = $877,110 Unfavorable

c. Labour Rate Variance = (Standard rate per labor hour - Actual Rate) x Actual Hours worked.

Standard rate per labor hour = $14 per labour hour

Actual Rate per labour hour = $16 per labour hour

Actual hours worked = 248,800

Labour Rate Variance = ($14 - $16) x 248,800 = $497,600 Unfavorable

d. Labour Efficiency Variance = (Standard hours required for actual output - Actual Hours worked) x Standard rate per hour.

Standard Hours for actual output = Actual units produced x standard hours per unit

= 96,900 x 3 = 290,700 hours

Actual Hours worked = 248,800

Standard rate per Hour = $ 14 per hour

Labour Efficiency Variance = (290,700 - 248,800) x $14 per hour = $586,600 Favorable

e. Budget Variance = Actual Fixed Overheads - Budgeted Fixed Overheads

= $2,749,500 - $2,919,000 = $169,500 Unfavorable

f. Fixed Overhead Volume Variance = Budgeted Overheads - Applied fixed overheads

Budgeted Overheads = $2,919,000

Applied Fixed Overheads = Budgeted Fixed Overheads / Budgeted labor hours x Actual Labor Hours

= $2,919,000 / 291,900 x 248,800 = $2,488,000

Fixed Overhead Volume Variance = $2,919,000 - $2,488,000 = $431,000 Favorable

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