and, therefore, has no inventories. The following information is available for the current month:
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.
Exercise 16-28 (Algo) Sales Activity Variance (LO 16-3)
Osage, Inc., manufactures and sells lamps. The company produces only when it receives orders and, therefore, has no inventories. The following information is available for the current month:
| Actual (based on actual orders for 450,000 units) | |||||||||||
| Sales revenue | $ | 4,490,000 | $ | 4,320,000 | |||||||
| Less | |||||||||||
| Variable costs | |||||||||||
| Materials | 1,440,000 | 1,440,000 | |||||||||
| Direct labor | 225,000 | 288,000 | |||||||||
| Variable |
627,000 | 576,000 | |||||||||
| Variable marketing and administrative | 444,000 | 456,000 | |||||||||
| Total variable costs | $ | 2,736,000 | $ | 2,760,000 | |||||||
| Contribution margin | $ | 1,754,000 | $ | 1,560,000 | |||||||
| Less | |||||||||||
| Fixed costs | |||||||||||
| Manufacturing overhead | 653,100 | 625,000 | |||||||||
| Marketing | 180,000 | 180,000 | |||||||||
| Administrative | 145,500 | 122,500 | |||||||||
| Total fixed costs | $ | 978,600 | $ | 927,500 | |||||||
| Operating profits | $ | 775,400 | $ | 632,500 | |||||||
Required:
Prepare a sales activity
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