Reference no: EM13572792

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.
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?