Question

Bellingham Company produces a product that requires 2.5 standard pounds per unit. The standard price is $3.75 per pound. The company produced 15,000 units that required 36,000 pounds, which were purchased at $4.00 per pound. The product also requires 4 standard hours per unit at a standard hourly rate of $20 per hour. The 15,000 units required 61,800 hours at an hourly rate of $19.85 per hour. In addition, the standard variable overhead cost per unit is $0.90 per hour and the actual variable factory overhead was $52,770. Finally, the standard fixed overhead cost per unit is $1.15 per hour at 58,000 hours, which is 100% of normal capacity. Assume that Bellingham sold 15,000 units at $172 per unit.

Prepare a income statement through gross profit for Bellingham Company. Enter all amounts as positive numbers except favorable variances.

For the Month Ended March 31 Sales 2 Cost of goods sold-at standard 3 Gross profit-at standard Unfavorable Favorable 5 Less variance adjustment to gross profit at standard: 6 Direct materials price 7 Direct materials quantity Direct labor rate Direct labor time 10 Factory overhead controllable Factory overhead volume Net variance from standard cost-unfavorable 13 Gross profit-actual

Answer 1

foswe page: Sales = 15000 x12 = 2580,000 Cost of gourts sold at standards disteet material (15000x3,5x3,75) = 140625 direct labowe = (15000x 4420) = 1200000 factory overhead = 15000 x4 x (0.90+1.15) = 60000 x .05 = 123000 Cost of goods sold at Standard = 140625 + 1200000+ (3000 = 1463625 Gooss porofit at standard = sales - cost of goods sold at standard = $580000 - 1463625 = 1116375 Variance adjustment to gross profit at standard unfavorable

page - 02 -02 = 36000 X (4-3.75) = 36000 x (0.25) = 9000 disiecé la bow time = 61800 - 11500044) x20 61800 - 60000X90 6/8 = 1800 X. 20 direct labor time - 36000 favorable Disiect materials quantity = 36000-(0.5x15000) X3.45 = 36000 - ( 37500) x3,75 *.1500X 3, 75 =- 5625 = 5625 direct (aboy = 61800X(19.85-20) = G1800 X -0.15 = -9270 - 9240 Factory overhead volume = 1.15x ( 58000-115000X 41) - 1.15* ( 58000-60000) = 1.15* - 2000 = -2300 = 2300

ned variance from standard cost- confavorable page.:03 - direct materials price - ( dinect materials quantity t disiet labor state) - 9000. (5625+9270) =) 9000 - 14895 -) -5895 Controllable + » direct labor time -(factory overhead Ri faitory overhead volume) 36000 - (1930+2300) => 36000 - 3530 -) 32410 Therefore net variance from standard cost - favorable. = 32470 - 5895 = 26545 Gross profit - actual = 116375 - 26545 = 1089800

page:-04 BELLINGHAM COMPANY income statement Through Gooss profit for the month ended march 31 02580,000 Sales cost of goods sold - at standard Gross profit - at standard 14 63625 176 375 unfarolable favorable 9000 5625 9270 lessi variance adjustment to quloss profit at Standard dintet materials price dizrek materiais quantity direct fabor rate direct labor time factory overhead controllable. factory overhead volume Alet variance from Standord lost - unfavorable Gross profit -adual 36000 1930 3300 26575 1089800 -- O