Appliance Corporation makes and sells electric fans. Each fan regularly sells for $43. The following cost data per fan is based on a full capacity of 144,000 fans produced each period. Direct materials $ 7 Direct labor $ 9 Manufacturing overhead (70% variable and 30% unavoidable fix
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.
Landor Appliance Corporation makes and sells electric fans. Each fan regularly sells for $43. The following cost data per fan is based on a full capacity of 144,000 fans produced each period.
| Direct materials | $ 7 |
|---|---|
| Direct labor | $ 9 |
| Manufacturing |
$ 10 |
A special order has been received by Landor for a sale of 15,000 fans to an overseas customer. The only selling costs that would be incurred on this order would be $5 per fan for shipping. Landor is now selling 129,000 fans through regular channels each period. Assume that direct labor is an avoidable cost in this decision. What should Landor use as a minimum selling price per fan in negotiating a price for this special order?
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