Carpenter Corporation produces a single product that sells for $7.00 per unit. Standard capacity is 100,000 units per year; 100,000 units were produced and 80,000 units were sold during the year. Manufacturing costs and selling and administrative expenses are presented below. There were no variances from the standard variable costs. Any under- or overapplied overhead is written off directly at year-end as an adjustment to cost of goods sold. Fixed costs Variable costs Direct material $0 $1.50 per unit produced Direct labor 0 1.00 per unit produced Manufacturing overhead $150,000 0.50 per unit produced Selling & Administration expense 80,000 0.50 per unit sold
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Carpenter Corporation produces a single product that sells for $7.00 per unit. Standard capacity is 100,000 units per year; 100,000 units were produced and 80,000 units were sold during the year.
There were no variances from the
| Fixed costs | Variable costs | |
|---|---|---|
| Direct material | $0 | $1.50 per unit produced |
| Direct labor | 0 | 1.00 per unit produced |
| Manufacturing overhead | $150,000 | 0.50 per unit produced |
| Selling & Administration expense | 80,000 | 0.50 per unit sold |
Refer to Carpenter Corporation. What is the net income under absorption costing?
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