Bellingham Company produces a product that requires 2.5 standard pounds per unit
ID: 2564219 • Letter: B
Question
Bellingham Company produces a product that requires 2.5 standard pounds per unit at a standard price of $3.75 per pound. The company used 36,000 pounds to produce 15,000 units, which were purchased at $4.00 per pound. Each unit requires 4 standard direct labor hours per unit at a standard hourly rate of $20 per hour. For the 15,000 units produced, 61,800 hours were needed and employees were paid an hourly rate of $19.85. The company uses a standard variable overhead cost per unit of $.90 per direct labor hour. Actual variable factory overhead was $52,770. The company uses a standard fixed overhead cost per unit of $1.15 per direct labor hour at 58,000 hours, which is 100% of normal capacity.
Required:
Prepare an income statement through gross profit for Bellingham Company for the month ending March 31. Assume Bellingham sold 15,000 units at $172 per unit. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.Explanation / Answer
Income Statement Sales (15000*172) 2580000 Less: Cost of Good sold at standard cost 1461325 Cost Varaince Direct Material Price Variance 9000 Direct material Qty varaince -5625 Labor rate variance -9270 Labor efficiency variance 36000 Variable overhead spending variance -2850 Variable overhead efficiency variance 1620 Fixed overhead Volume variance 4370 Total cost variance 33245 Cost of Good sold at actual cost 1494570 Gross profit 1085430 Cost of Good sold at standard cost Direct Material (2.5*3.75*15000) 140625 Direct labor (4*20*15000) 1200000 Variable overhead (4*.9*15000) 54000 Fixed overhead (58000*1.15) 66700 1461325 Direct Material Price Variance 9000 U AQ*(AR-SR) 36000*(4-3.75) Direct material Qty varaince 5625 F SR*(AQ-SQ allowed) -5625 3.75*(36000-(15000*2.5)) Labor rate variance 9270 F (AH*AR)-(AH*SR) -9270 61800*(19.85-20) Labor efficiency variance 36000 U SR*(AH-SH allowed) 20*(61800-(15000*4)) Variable overhead spending variance (AH*AR)-(AH*SR) 2850 F 52770*(61800*.9) -2850 Variable overhead efficiency variance 1620 U SR*(AH-SH allowed) .9*(61800-(15000*4)) Volume variance 4370 U Absorbed-Budgeted fixed overhead (61800*1.15)-66700
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