You have been provided with the following information: Total Sales $ 90,000 Less Variable expenses 54,000 Contribution margin 36,000 Less fixed expenses 24,000 Operating profit $ 12,000 If sales decrease by 10%, what level of fixed costs will maintain the current operating profit?
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.
You have been provided with the following information:
| Total | ||
| Sales | $ | 90,000 |
| Less Variable expenses | 54,000 | |
| Contribution margin | 36,000 | |
| Less fixed expenses | 24,000 | |
| Operating profit | $ | 12,000 |
If sales decrease by 10%, what level of fixed costs will maintain the current operating profit?
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