Reference no: EM133173197

Question - Consider the following events at the NuTone division of Scovill:

In the past year, The NuTone division built 1,000 units of a particular model of paddle fan. The standard (and actual) direct material cost was $20/unit. The standard cost for a direct labor hour was $8.00. Standard direct labor hours for this level of production were 1,200; however, actual direct labor hours used were 400. The workers were paid an average hourly rate of $10 (including incentives) because the average direct labor efficiency rate was 300%. The overhead rate in the plant was 150% of direct labor.

Quarterly sales of this model were 100, 125, 150, and 125 units, respectively, at a constant price of $60 each, for total annual sales of 500 units. Production volume was steady at 250 units per quarter.

At year-end, a physical inventory count was taken. It revealed 400 units left in inventory; these were determined to have an average cost of $30 each.

1. Compute the standard cost/unit that NuTone would use to account for the production and sale of this model over the course of the year.

2. Compute revenue, Cost of goods sold, gross profit margin, and ending inventory for each of the first three quarters, using the standard cost you computed above.

3. Make the end-of-year adjustment required by the inventory count and valuation assumption. How does this adjustment affect reported income for the 4 th quarter and the year?