Question

Ultease Corporation: budgeting

Nov 29, 2025 | Posted Assignments

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 35,000 units or 45,500 direct labor hours):
Direct materials (2.0 pounds at $12)	$	24
Direct labor (1.3 hours at $80)		104
Variable overhead (1.3 hours at $10)		13
Fixed overhead (1.3 hours at $20)		26

Standard cost per unit	$	167

Budgeted selling and administrative costs:
Variable	$	3	per unit
Fixed	$	1,600,000

Expected sales activity: 31,000 units at $300 per unit

Desired ending inventories: 18% 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		34,000
Units sold		32,500
Unit selling price	$	295
Direct labor hours worked		43,700
Direct labor costs	$	3,539,700
Direct materials purchased		72,000	pounds
Direct material costs	$	864,000
Direct material used		72,000	pounds
Actual fixed overhead	$	1,300,000
Actual variable overhead	$	355,000
Actual selling and administrative costs	$	1,793,000

In addition, all over- or underapplied overhead and all product cost variances are adjusted to cost of goods sold.

10.00 points

c.

Find the direct labor variances. Indicate if they are favorable or unfavorable and why they would be considered
as such. (Indicate the effect of each variance by selecting Favorable,
Unfavorable, and “None” for no effect. Negative amounts should be indicated by a minus sign. Omit the “$” sign
in your response.)

Direct labor variances
Labor efficiency variance	$	(Click to select)FavourableUnfavorableNone
Labor rate variance	$	(Click to select)UnfavorableNoneFavourable

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4.

value:
10.00 points

d.

Find the direct materials variances (materials price variance and quantity variance). (Leave no cells blank – be certain to enter “0” wherever required. Indicate the effect
of each variance by selecting Favorable, Unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Enter your
answers in dollars not in pounds. Omit the “$” sign in your response.)

Direct material variances
Material quantity variance	$	(Click to select)FavourableNoneUnfavorable
Material price variance	$	(Click to select)UnfavorableNoneFavourable

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5.

value:
10.00 points

e-1

Find the total over- or underapplied (both fixed and variable) overhead. Would cost of goods sold be a larger
or smaller expense item after the adjustment for over- or underapplied overhead? (Omit the “$” sign in your response.)

(Click to select)Under appliedOver applied overhead

$

e-2

Would cost of goods sold be a larger or smaller expense item after the adjustment for over- or underapplied
overhead?

	Larger expense
	Smaller expense

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6.

value:
10.00 points

f.	Calculate the actual plant operating profit for the year. (Omit the “$” sign in your response.)

Operating profit

$

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7.

value:
10.00 points

g.	Prepare a flexible budget for the Bellingham plant for its first year of operations. (Input all amounts as positive values. Omit the “$” sign in your response.)


(Click to select)Operating incomeFlexible budget operating profitCost of goods soldOperating lossFlexible budget non-operating profit	$
(Click to select)Operating lossLess: Actual operating profitOperating incomeAdd: Actual operating profitCost of goods sold

Flexible budget variance	$

(Click to select)Budgeted operating profitCost of goods soldBudgeted non-operating profitOperating incomeOperating loss
(Click to select)Operating lossOperating incomeLess: Actual operating profitCost of goods soldAdd: Actual operating profit

Master budget variance	$

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8.

value:
10.00 points

h.

Assume Utease Corporation is planning to change its evaluation of business operations in all plants from the
profit center format to the investment center format. If the average invested capital at the Bellingham plant
is $9,430,000, compute the return on investment (ROI) for the first year of operations. Use the DuPont method
of evaluation to compute the return on sales (ROS) and capital turnover (CT) for the plant. (Round your answers to 2
decimal places. Omit the “%” sign in your response.)


ROI	%
ROS	%
Capital Turnover	%

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9.

value:
10.00 points

i

Assume that under the investment center evaluation plan the plant manager will be awarded a bonus based on ROI.
If the manager has the opportunity in the coming year to invest in new equipment for $800,000 that will
generate incremental earnings of $75,000 per year, would the manager undertake the project?