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New Look Jacket Inc.

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MODULE 2, ASSIGNMENT 4
October 22, 2013 Topic: Standard Costing, Variance Analysis and Budgets
Overview
The main topics for Assignment 4 are standard costing, variance analysis, and budget creation. Accountants of all management levels often have to analyze variance reports in order to help in the decision-making process. Through the differentiation of costs into fixed and variable classifications, managers are better able to construct break-even charts and other decision-making and control tools. Understanding cost breakdown can better determine where the inefficiencies of the operations lie, and determine the first step towards enhancing the efficiency of an operation. In addition, cost analysis helps toward the creation of …show more content…

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New Look Jacket Inc.
In early 2013, the CEO of the New Look Jacket Inc. (NLJ) was reviewing the 2012 operating results (see Exhibit 1). He was pleased to see that sales and net income were higher than the budget, but he had a feeling that the aggregated numbers were hiding some information. He decided to call in the company’s newly hired controller, a Certified
Management Accountant, to ask for a variance analysis.
NLJ produces and sells two lines of jackets: nylon and leather. The market for nylon jackets is large and competitive, but the leather jacket market has traditionally been small with only a few competing manufacturers. During 2012, fashion trendsetters highlighted leather jackets, creating a ten-time increase in the market’s demand for leather jackets. Unfortunately, NLJ did not foresee this trend and had planned sales of only 5,000 leather

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