Question

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 $2,882,000 of fixed manufacturing overhead for an estimated allocation base of 288,200 direct labor-hours. Wallis does not maintain any beginning or ending work in process inventory. The company's beginning balance sheet is as follows: Wallis Company Balance Sheet 1/1/xx (dollars in thousands) Assets Cash S 720 Finished aonde ory plant, and equi 290 8,700 ent, net 9,880 Total assets Liabilities and Equity Retained earnings 9,880 Total liabilities and equity 9,880 The company's standard cost card for its only product is as follows:

Answer 1

2 and 3

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	720.00	170.00	0.00	290.00	8700.00	=	0.00	0.00	0.00	0.00	0.00	0.00	9880.00
a.	-6860.70	7022.40				=	161.70
b.		-6551.20	5788.16			=		-763.04
c.	-3926.40		3712.80			=			-736.20	522.60
d.	-1342.00		2856.00		-1399.00	=					141.00	-26.00
e.			-12356.96	12356.96		=
f.	15674.00					=							15674.00
g.				-11967.56		=							-11967.56
h.	-2121.00					=							-2121.00
i.						=	-161.70	763.04	736.20	-522.60	-141.00	26.00	-699.94
12/31	2143.90	641.20	0.00	679.40	7301.00	=	0.00	0.00	0.00	0.00	0.00	0.00	10765.50

Predetermined overhead rate = $2882000/288200 = $10 per direct labor hour

Fixed overhead applied = (95200 x 3 x $10)/1000 = $2856

4.

Wallis Company
Income Statement
For the Year Ended 12/31/XX
(dollars in thousands)
Sales revenue (92200 x $170/100)		15674
Cost of goods sold at standard (92200 x $129.80/1000)	11968
Total variance adjustments	699.94	12668
Gross profit		3007
Selling and administrative expenses		2121
Net operating income		885