# Dvorak Company produces a product that requires five standard pounds per unit. The standard price...

## Question:

Dvorak Company produces a product that requires five standard pounds per unit. The standard price is $2.50 per pound. Assume the company produced 1,000 units of product. 1,000 units required 4,500 pounds, which were purchased at$3.00 per pound. The product requires three standard hours per unit at a standard hourly rate of $17 per hour. The 1,000 units required 2,800 hours at an hourly rate of$16.50 per hour. The standard variable overhead cost per unit is $1.40 per hour. The actual variable factory overhead was$4,000. The standard fixed overhead cost per unit is $0.60 per hour at 3,500 hours, which is 100% of normal capacity. Prepare a 2014 income statement through gross profit for Dvorak Company. Assume Dvorak sold 1,000 units at$90 per unit.

## Income Statement

The income statement is prepared to compute the profitability of a particular period. This statement is made to report the profits and losses over a specific period of time. The income statement is a part of the financial statements of the business.

 Sales (1,000 * $90)$90,000 Cost of goods sold (1,000 * 5 * $2.50) + (1,000 * 3 *$17) + (1,000 * 3 * ($1.40 +$0.60)) $69,500 Gross profit at standard$20,500 Favorable Unfavorable Less: Variances from standard cost Direct materials price (4,500 * ($2.50 -$3)) $2,250 Direct materials quantity ($2.50 * (5,000 - 4,500)) $1,250 Direct labor rate (2,800 hrs * ($17 - $16.50))$1,400 Direct labor efficiency ($17 * (3,000 - 2,800))$3,400 Factory overhead controllable (($1.40 * (1,000 * 3) -$4,000)) $200 Factory overhead volume ($0.6*((1,000 * 3 hrs) - 3,500 hrs)) $300$3,700 Gross profit ($20,500 +$3,700) \$24,200 