Question

Forsyth Company manufactures one product, it does not maintain any beginning or ending inventories, and its uses a standard cost system. During the year, the company produced and sold 10,000 units at a price of $152 per unit. Its standard cost per unit produced is $122 and its selling and administrative expenses totaled $243,500. Forsyth does not have any variable manufacturing overhead costs and it recorded the following variances during the year:

Materials price variance	$	8,200	F
Materials quantity variance	$	11,900	U
Labor rate variance	$	5,200	U
Labor efficiency variance	$	6,100	F
Fixed overhead budget variance	$	4,200	F
Fixed overhead volume variance	$	13,700	F

Required:

1. When Forsyth closes its standard cost variances, the cost of goods sold will increase (decrease) by how much?

look like this

When Forsyth closes its standard cost variances, the cost of goods sold will increase (decrease) by how much?

The cost of goods sold will

by

• R

2. Prepare an income statement for the year.

look like this

Prepare an income statement for the year.

Forsyth Company
Income Statement
For the Year
Total variance adjustments

Answer 1

Material price variance	$8,200 F
Material quantity variance	11,900 U
Labor rate variance	5,200 U
Labor efficiency variance	6,100 F
Fixed overhead budget variance	4,200 F
Fixed overhead volume variance	13,700 F
Total variance	$15,100 F

1. Cost of goods sold will decrease by $15,100

2.

Forsyth Company Income Statement For The Year
Sales (10,000*$152)		$1,520,000
Cost of goods sold-Unadjusted (10,000*$122)	$1,220,000
Total variance adjustment	(15,100)
Cost of goods sold		1,204,900
Gross profit		315,100
Selling and administrative expenses		243,500
Net income		$71,600