Road Warrior Corporation began operations early in the current year, building luxury motor homes. During the year, the company started and completed 45 motor homes at a cost of $55,000 per unit. Of these, 43 were sold for $105,000 each, and two remain in finished goods inventory. In addition, the company had six partially completed units in its factory at year-end. Total costs for the year (summarized alphabetically) were as follows. Direct materials used ... $750,000 Direct labor ... 800,000 Income tax expense ... 100,000 General and administrative expenses ... 500,000 Manufacturing overhead ... 1,200,000 Selling expenses ... 500,000 Compute the following for the current year. d. Gross profit on sales e. ending inventories (1) work in process and (2) finished goods
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.
Road Warrior Corporation began operations early in the current year, building luxury motor homes. During the year, the company started and completed 45 motor homes at a cost of $55,000 per unit. Of these, 43 were sold for $105,000 each, and two remain in finished goods inventory. In addition, the company had six partially completed units in its factory at year-end. Total costs for the year (summarized alphabetically) were as follows.
Direct materials used ... $750,000
Direct labor ... 800,000
Income tax expense ... 100,000
General and administrative expenses ... 500,000
Manufacturing overhead ... 1,200,000
Selling expenses ... 500,000
Compute the following for the current year.
d. Gross profit on sales
e. ending inventories (1) work in process and (2) finished goods
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