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 fixedâit does not incur any variable manufacturing overhead costs. The predetermined overhead rate is based on a cost formula that estimated $2,899,000 of fixed manufacturing overhead for an estimated allocation base of 289,900 direct labor-hours. Wallis does not maintain any beginning or ending work in process inventory.
The companyâs beginning balance sheet is as follows:
Wallis Company Balance Sheet 1/1/XX (dollars in thousands) Assets Cash $ 850 Raw materials inventory 300 Finished goods inventory 420 Property, plant, and equipment, net 10,000 Total assets $ 11,570 Liabilities and Equity Retained earnings $ 11,570 Total liabilities and equity $ 11,570
The companyâs standard cost card for its only product is as follows:
Inputs (1)
Standard
Quantity
or Hours (2)
Standard
Price
or Rate Standard
Cost
(1) Ã (2) Direct materials 2 pounds $ 33.00 per pound $ 66.00 Direct labor 3.00 hours $ 15.00 per hour 45.00 Fixed manufacturing overhead 3.00 hours $ 10.00 per hour 30.00 Total standard cost per unit $ 141.00
During the year Wallis completed the following transactions:
Purchased (with cash) 237,500 pounds of raw material at a price of $31.00 per pound.
Added 218,750 pounds of raw material to work in process to produce 96,500 units.
Assigned direct labor costs to work in process. The direct laborers (who were paid in cash) worked 248,000 hours at an average cost of $16.00 per hour to manufacture 96,500 units.
Applied fixed overhead to work in process inventory using the predetermined overhead rate multiplied by the number of direct labor-hours allowed to manufacture 96,500 units. Actual fixed overhead costs for the year were $2,747,500. Of this total, $1,355,000 related to items such as insurance, utilities, and salaried indirect laborers that were all paid in cash and $1,392,500 related to depreciation of equipment.
Transferred 96,500 units from work in process to finished goods.
Sold (for cash) 93,500 units to customers at a price of $170 per unit.
Transferred the standard cost associated with the 93,500 units sold from finished goods to cost of goods sold.
Paid $2,127,500 of selling and administrative expenses.
Closed all standard cost variances to cost of goods sold.
Required:
1. Compute all direct materials, direct labor, and fixed overhead variances for the year.
2. Record transactions a through i for Wallis Company.
3. Compute the ending balances for Wallis Companyâs balance sheet.
4. Prepare Wallis Companyâs income statement for the year.
Compute all direct materials, direct labor, and fixed overhead variances for the year. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
Materials price variance Materials quantity variance Labor rate variance Labor efficiency variance Budget variance Volume variance
Record transactions a through i for Wallis Company.
Compute the ending balances for Wallis Companyâs balance sheet.
(Unfavorable variances and decreases in balance sheet accounts should be entered with a minus sign. Enter your dollars in thousands.)
Show less
Wallis Company Transaction Analysis For the Year Ended 12/31/XX (dollars in thousands) Cash Raw Materials Work-in-Process Finished Goods PP&E (net) = Materials Price Variance Material Quantity Variance Labor Rate Variance Labor Efficiency Variance Fixed Overhead Budget Variance Fixed Overhead Volume Variance Retained Earnings 1/1 = a. = b. = c. = d. = e. = f. = g. = h. = i. = 12/31 =
Prepare Wallis Companyâs income statement for the year. (Enter your dollars in thousands. Round your answers to the nearest whole dollar amount.)
Wallis Company Income Statement For the Year Ended 12/31/XX (dollars in thousands) Total variance adjustments 0 $0
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 fixedâit does not incur any variable manufacturing overhead costs. The predetermined overhead rate is based on a cost formula that estimated $2,899,000 of fixed manufacturing overhead for an estimated allocation base of 289,900 direct labor-hours. Wallis does not maintain any beginning or ending work in process inventory.
The companyâs beginning balance sheet is as follows:
| Wallis Company | ||
| Balance Sheet | ||
| 1/1/XX | ||
| (dollars in thousands) | ||
| Assets | ||
| Cash | $ | 850 |
| Raw materials inventory | 300 | |
| Finished goods inventory | 420 | |
| Property, plant, and equipment, net | 10,000 | |
| Total assets | $ | 11,570 |
| Liabilities and Equity | ||
| Retained earnings | $ | 11,570 |
| Total liabilities and equity | $ | 11,570 |
The companyâs standard cost card for its only product is as follows:
| Inputs | (1) Standard Quantity or Hours | (2) Standard Price or Rate | Standard Cost (1) Ã (2) | ||||
| Direct materials | 2 pounds | $ | 33.00 | per pound | $ | 66.00 | |
| Direct labor | 3.00 hours | $ | 15.00 | per hour | 45.00 | ||
| Fixed manufacturing overhead | 3.00 hours | $ | 10.00 | per hour | 30.00 | ||
| Total standard cost per unit | $ | 141.00 | |||||
During the year Wallis completed the following transactions:
Purchased (with cash) 237,500 pounds of raw material at a price of $31.00 per pound.
Added 218,750 pounds of raw material to work in process to produce 96,500 units.
Assigned direct labor costs to work in process. The direct laborers (who were paid in cash) worked 248,000 hours at an average cost of $16.00 per hour to manufacture 96,500 units.
Applied fixed overhead to work in process inventory using the predetermined overhead rate multiplied by the number of direct labor-hours allowed to manufacture 96,500 units. Actual fixed overhead costs for the year were $2,747,500. Of this total, $1,355,000 related to items such as insurance, utilities, and salaried indirect laborers that were all paid in cash and $1,392,500 related to depreciation of equipment.
Transferred 96,500 units from work in process to finished goods.
Sold (for cash) 93,500 units to customers at a price of $170 per unit.
Transferred the standard cost associated with the 93,500 units sold from finished goods to cost of goods sold.
Paid $2,127,500 of selling and administrative expenses.
Closed all standard cost variances to cost of goods sold.
Required:
1. Compute all direct materials, direct labor, and fixed overhead variances for the year.
2. Record transactions a through i for Wallis Company.
3. Compute the ending balances for Wallis Companyâs balance sheet.
4. Prepare Wallis Companyâs income statement for the year.
Compute all direct materials, direct labor, and fixed overhead variances for the year. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
| ||||||||||||||||||||||
Record transactions a through i for Wallis Company.
Compute the ending balances for Wallis Companyâs balance sheet.
(Unfavorable variances and decreases in balance sheet accounts should be entered with a minus sign. Enter your dollars in thousands.)
Show less
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepare Wallis Companyâs income statement for the year. (Enter your dollars in thousands. Round your answers to the nearest whole dollar amount.)
| ||||||||||||||||||||||||||||||||||
Related questions
Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. It started only two jobs during MarchâJob P and Job Q. Job P was completed and sold by the end of March and Job Q was incomplete at the end of March. The company uses a plantwide predetermined overhead rate based on direct labor-hours. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March):
| Estimated total fixed manufacturing overhead | $ | 14,800 | |
| Estimated variable manufacturing overhead per direct labor-hour | $ | 1.60 | |
| Estimated total direct labor-hours to be worked | 3,700 | ||
| Total actual manufacturing overhead costs incurred | $ | 21,000 | |
| Job P | Job Q | |||||
| Direct materials | $ | 14,400 | $ | 9,700 | ||
| Direct labor cost | $ | 44,800 | $ | 12,000 | ||
| Actual direct labor-hours worked | 2,800 | 750 | ||||
| Q1. If Sweeten Company requisitioned $28,200 from raw materials inventory during March, then how much indirect materials cost would be included in Manufacturing Overhead Incurred? Q2. If Sweeten Companyâs labor time tickets totaled $62,400 for the month of March, then how much indirect labor cost would be included in Manufacturing Overhead Incurred? Q3. Calculate the cost of goods sold using the direct method. Q4. Calculate the cost of goods sold using the direct method. Q5. Calculate the cost of goods sold using the indirect method. Q6. How would you revise your answer to question 11 if the company had beginning work in process inventory of $9,700? Q7.How would you revise your answer to question 12 if the company had beginning finished goods inventory of $13,700? Q8. Assume that Job P includes 24 units that each sell for $3,700 and that the companyâs selling and administrative expenses in March were $10,000. Prepare an absorption costing income statement for March. | ||||||
Sweeten Company had no jobs in progress at the beginning ofMarch and no beginning inventories. It started only two jobs duringMarchâJob P and Job Q. Job P was completed and sold by the end ofthe March and Job Q was incomplete at the end of the March. Thecompany uses a plantwide predetermined overhead rate based ondirect labor-hours. The following additional information isavailable for the company as a whole and for Jobs P and Q (all dataand questions relate to the month of March): |
| Estimated total fixed manufacturing overhead | $ | 14,400 |
| Estimatedvariable manufacturing overhead per direct labor-hour | $ | 1.50 |
| Estimatedtotal direct labor-hours to be worked | 3,600 | |
| Total actualmanufacturing overhead costs incurred | $ | 19,500 |
| Job P | Job Q | |||
| Direct materials | $ | 15,000 | $ | 9,600 |
| Direct labor cost | $ | 40,500 | $ | 12,000 |
| Actual direct labor-hoursworked | 2,700 | 800 | ||
1. Assume the ending raw materials inventory is $2,600 and thecompany does not use any indirect materials. Prepare a schedule ofcost of goods manufactured.
2. Prepare the journal entry to transfer costs from Work inProcess to Finished Goods
3. Prepare a schedule of cost of goods sold.
