ProTech began business at the start of the current year. The company planned to produce 40,000 units, and actual production conformed to expectations. Sales totaled 37,000 units at $40 each. Costs incurred were: Variable manufacturing overhead per unit $ 16 Fixed manufacturing overhead 275,000 Variable selling and administrative cost per unit 6 Fixed selling and administrative cost per unit 160,000 If there were no variances, the company's absorption-costing income would be: Multiple Choice $176,625. $251,625. $262,125. $666,000. None of the answers is correct.
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.
MC Qu. 8-48 ProTech began business at...
ProTech began business at the start of the current year. The company planned to produce 40,000 units, and actual production conformed to expectations. Sales totaled 37,000 units at $40 each. Costs incurred were:
| Variable manufacturing |
$ | 16 | |
| Fixed manufacturing overhead | 275,000 | ||
| Variable selling and administrative cost per unit | 6 | ||
| Fixed selling and administrative cost per unit | 160,000 | ||
If there were no variances, the company's absorption-costing income would be:
-
$176,625.
-
$251,625.
-
$262,125.
-
$666,000.
-
None of the answers is correct.
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