accounting records for Portland Products report the following manufacturing costs for the past year. Direct materials $ 390,000 Direct labor 262,000 Variable overhead 231,000 Production was 170,000 units. Fixed manufacturing overhead was $860,000. For the coming year, costs are expected to increase as follows: direct materials costs by 20 percent, excluding any effect of volume changes; direct labor by 4 percent; and fixed manufacturing overhead by 10 percent. Variable manufacturing overhead per unit is expected to remain the same. Required A: Prepare a cost estimate for a volume level of 136,000 units of p
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.
The accounting records for Portland Products report the following
Direct materials $ 390,000
Direct labor 262,000
Variable
Production was 170,000 units. Fixed manufacturing overhead was $860,000.
For the coming year, costs are expected to increase as follows: direct materials costs by 20 percent, excluding any effect of volume changes; direct labor by 4 percent; and fixed manufacturing overhead by 10 percent. Variable manufacturing overhead per unit is expected to remain the same.
Required A:
- Prepare a cost estimate for a volume level of 136,000 units of product this year. (Do not round intermediate calculations.)
Cost Item This Year’s cost
Direct materials _______________
Direct labor _______________
Variable overhead _______________
Fixed overhead _______________
Total costs _______________
Required B:
- Determine the costs per unit for last year and for this year.
Cost per Unit
Last year ___________
This year ___________
Step by step
Solved in 2 steps
