Com Prob 6

COMPREHENSIVE PROBLEM 6
Utease Corporation
60 Strong
This problem covers various topics from Chapters 22, 23, 24, and 25. Students are asked to prepare budget schedules, calculate variances, determine possible causes for differences between budgeted and actual results, and to perform ROI analysis.

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60 Minutes, Strong

COMPREHENSIVE PROBLEM 6
UTEASE CORPORTION

a. Production Budget:
Budgeted unit sales ………………………………………………………………
Add: Desired ending inventory of finished goods (.10 × 20,000 units) ………
Units budgeted to be available for sale …………………………………………
Less: Beginning inventory units …………………………………………………
Planned Production of Finished Goods …………………………………………
b.

BELLINGHAM PLANT
Budgeted Income Statement
Year Ending December 31, 20___
Sales Revenue (20,000 units × $425 per unit)
Cost of Goods Sold (20,000 units × $250 per unit)
Gross Profit
Operating Expenses:
Variable Selling and Administrative Expense (20,000 units × $5 per unit)
Fixed Selling and Administrative Expense
Total Operating Expenses
Operating Income

Units
20,000
2,000
22,000
0
22,000

$ 8,500,000
5,000,000
3,500,000
100,000
1,800,000
1,900,000
$ 1,600,000

Copyright © 2015 by McGraw-Hill Education All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.

COMPREHENSIVE PROBLEM 6
UTEASE CORPORATION (continued)
c. Direct labor variances:
Labor efficiency variance = standard hourly rate [(actual units produced × standard hours per unit) - actual hours worked]
= $90 per hour [(23,000 units × 1.5 hours per unit) - 34,000 hours] = $90 per hour (34,500 - 34,000)
= $45,000 favorable
The labor efficiency variance is considered favorable because it took workers 500 fewer hours to produce 23,000 units than was originally expected. When this variance is closed to
Cost of Goods Sold, it will result in a