Variable versus absorption costing Brent, Inc., manufactures wool sweaters.Costs incurred in making 55,000 sweaters in August included $330,000 of fixed manufacturing overhead. The total absorption cost per sweater was $38.60.Required:a. Calculate the variable cost per sweater.b. The ending inventory of sweaters was 7,200 units lower at the end of the month than at the beginning of the month. By how much and in what direction (higher or lower) would cost of goods sold for the month of August be different under variable costing than under absorption costing?c. Express the sweater cost in a cost formula.
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.
Variable versus absorption costing Brent, Inc., manufactures wool sweaters.
Costs incurred in making 55,000 sweaters in August included $330,000 of fixed manufacturing overhead. The total absorption cost per sweater was $38.60.
Required:
a. Calculate the variable cost per sweater.
b. The ending inventory of sweaters was 7,200 units lower at the end of the month than at the beginning of the month. By how much and in what direction (higher or lower) would cost of goods sold for the month of August be different under variable costing than under absorption costing?
c. Express the sweater cost in a cost formula.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
