Clementine Productions is a new business in the industry. They are currently producing guitar and flutes and are planning to add violins in their instruments. Based on the study conducted, the following are cost data related to the creation of two types of violins. Type 1 ($) Type 2 ($) Direct Materials 110 per unit 170 per unit Direct Labor 170 per unit 40 per unit Fixed factory overhead 1,600 4,797 Variable factory overhead 14 per unit 62 per unit Variable selling expense 7 per unit 11 per unit Compute for the number of violin sales which would give Clementine the same operating income when they choose either of the types detailed above.
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.
Clementine Productions is a new business in the industry. They are currently producing guitar and flutes and are planning to add violins in their instruments. Based on the study conducted, the following are cost data related to the creation of two types of violins.
| Type 1 ($) | Type 2 ($) | |
| Direct Materials | 110 per unit | 170 per unit |
| Direct Labor | 170 per unit | 40 per unit |
| Fixed factory |
1,600 | 4,797 |
| Variable factory overhead | 14 per unit | 62 per unit |
| Variable selling expense | 7 per unit | 11 per unit |
Compute for the number of violin sales which would give Clementine the same operating income when they choose either of the types detailed above.
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