am Manufacturing Incorporated has provided the following estimates concerning its manufacturing costs: Fixed Cost per Month Cost per Machine-Hour Direct materials $ 5.70 Direct labor $ 42,300 Supplies $ 0.30 Utilities $ 1,000 $ 0.25 Depreciation $ 15,300 Insurance $ 11,700 For example, utilities should be $1
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.
Wyckam Manufacturing Incorporated has provided the following estimates concerning its
| Fixed Cost per Month | Cost per Machine-Hour | |
|---|---|---|
| Direct materials | $ 5.70 | |
| Direct labor | $ 42,300 | |
| Supplies | $ 0.30 | |
| Utilities | $ 1,000 | $ 0.25 |
| $ 15,300 | ||
| Insurance | $ 11,700 |
For example, utilities should be $1,000 per month plus $0.25 per machine-hour. The company expects to work 4,200 machine-hours in June. Note that the company’s direct labor is a fixed cost.
Required:
Prepare the company’s planning budget for June.
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