Question

Utease Corporation has many production plants across the midwestern United States. A newly opened plant, the Bellingham plant, produces and sells one product. The plant is treated, for responsibility accounting purposes, as a profit center. The unit standard costs for a production unit, with overhead applied based on direct labor hours, are as follows:

Manufacturing costs (per unit based on expected activity of 27,000 units or 56,700 direct labor hours):

Direct materials (3.4 pounds at $20) $ 68

Direct labor (2.1 hours at $60) 126

Variable overhead (2.1 hours at $20) 42

Fixed overhead (2.1 hours at $30) 63

Standard cost per unit $ 299

Budgeted selling and administrative costs:

Variable $ 8 per unit Fixed $ 1,200,000

Expected sales activity: 23,000 units at $450 per unit Desired ending inventories: 16% of sales

Assume this is the first year of operations for the Bellingham plant. During the year, the company had the following activity:

Units produced 26,000 Units sold 24,500 Unit selling price $ 445 Direct labor hours worked 54,100 Direct labor costs $ 3,300,100 Direct materials purchased 92,400 pounds Direct materials costs $ 1,848,000 Direct material used 92,400 pounds Actual fixed overhead $ 900,000 Actual variable overhead $ 1,034,000 Actual selling and administrative costs $ 1,984,000 In addition, all over- or underapplied overhead and all product cost variances are adjusted to cost of goods sold. rev:

Comprehensive Problem 1 Part f. Calculate the actual plant operating profit for the year.

Answer 1

Computation of Actual operating Income ( in $)
Unit Sold	24500
Sales	1,09,02,500.00
Cost of Godds Sold
Direct Labur	33,00,100.00
Direct Material	18,48,000.00
Actual Fixed Overhead	9,00,000.00
Actual Variable Overhead	10,34,000.00
Actual S &A Cost	19,84,000.00
Operating Profit	18,36,400.00