Swain Company manufactures one product, it does not maintain any beginning or ending inventories, and its uses a standard cost system. The company's beginning balance in Retained Earnings is $70,000. It sells one product for $165 per unit and it generated total sales during the period of $577,500 while incurring selling and administrative expenses of $54,000. Swain Company does not have any variable manufacturing overhead costs and its standard cost card for its only product is as follows:

During the period, Swain recorded the following variances:
Materials price variance . . . . . . . . . . . . . . . . . . . . . . . . . . $3,400 U
Materials quantity variance . . . . . . . . . . . . . . . . . . . . . . . . $9,000 F
Labor rate variance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,900 U
Labor efficiency variance . . . . . . . . . . . . . . . . . . . . . . . . . $6,600 U
Fixed overhead budget variance . . . . . . . . . . . . . . . . . . . $1,300 U
Fixed overhead volume variance . . . . . . . . . . . . . . . . . . . $5,500 F
Required:
1. When Swain closes its standard cost variances, the cost of goods sold will increase (decrease) by how much?
2. Using Exhibit 10B-5 as a guide, prepare an income statement for the year.
Exhibit 10 B - 5: Dylan Corporation: Income Statement

3. What is Swain's ending balance in Retained Earnings?

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Standard Cost Standard Quantity or Hours Standard or Rate 7.0 pounds $9 per pound 63 30 50 $143 2.5 hours $12 per hour 2.5 hours$20 per hour Total standard cost per unit. Dylan Corporation Income Statement For Year Ended 12/31/Xx (dollars in thousands) 2 4. 6 Sales 7 Cost of goods sold at standard 8 Total variance adjustments 9 Cost of goods sold 10 Gross margin 11 Selling and administrative expenses 12 Net operating income 13 4 Exhibi 10B-4 Exhibit 10B-5 s 5,270 S 4,335 36 4,371 899 450 S 449