Cleland Corporation Manufactures One Product

question 44

Essay

Cleland Corporation manufactures one product.It does not maintain any beginning or ending Work in Process inventories.The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold.There is no variable manufacturing overhead.The standard cost card for the company's only product is as follows:
The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $56,250 and budgeted activity of 12,500 hours.
During the year,the company completed the following transactions:
a.Purchased 29,400 gallons of raw material at a price of $5.20 per gallon.
b.Used 25,520 gallons of the raw material to produce 18,300 units of work in process.
c.Assigned direct labor costs to work in process.The direct labor workers (who were paid in cash)worked 8,850 hours at an average cost of $19.60 per hour.
d.Applied fixed overhead to the 18,300 units in work in process inventory using the predetermined overhead rate multiplied by the number of direct labor-hours allowed.Actual fixed overhead costs for the year were $41,650.Of this total,-$3,350 related to items such as insurance,utilities,and indirect labor salaries that were all paid in cash and $45,000 related to depreciation of manufacturing equipment.
e.Transferred 18,300 units from work in process to finished goods.
f.Sold for cash 20,600 units to customers at a price of $26.70 per unit.
g.Completed and transferred the standard cost associated with the 20,600 units sold from finished goods to cost of goods sold.
h.Paid $55,000 of selling and administrative expenses.
i.Closed all standard cost variances to cost of goods sold.
Required:
1.Compute all direct materials,direct labor,and fixed overhead variances for the year.
2.Record the above transactions in the worksheet that appears below.Because of the width of the worksheet,it is in two parts.In your text,these two parts would be joined side-by-side to make one very wide worksheet.The beginning balances have been provided for each of the accounts,including the Property,Plant,and Equipment (net)account which is abbreviated as PP&E (net).

3.Determine the ending balance (e.g.,12/31 balance)in each account.

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Definitions:

Primary Market

A part of the capital market where new securities are initially sold to investors, typically through underwriting.

Secondary Market

A market where previously issued financial instruments such as stock, bonds, options, and futures are bought and sold.

Default Risk

The risk that a borrower will not make the required payments on a debt obligation, leading to a default situation.

U.S. Government Debt

U.S. Government debt, also known as sovereign debt, is the total amount of money borrowed by the Federal government through the issuance of securities by the Treasury and other federal government agencies.