arkson Company had the following results of operations for the past year: Contribution margin income statement Per Unit Annual Total Sales (9,000 units) $ 20.00 $ 180,000 Variable costs Direct materials 4.25 38,250 Direct labor 6.00 54,000 Overhead 2.00 18,000 Contribution margin 7.75 69,750 Fixed costs Fixed overhead 4.25 38,250 Income $ 3.50 $ 31,500 A foreign company offers to buy 2,500 units at $14 per unit. In addition to variable manufacturing and administrative costs, selling these units would increase fixed overhead by $2,000 for the purchase of special tools. Markson’s annual productive capacity is 13,500 units. If Markson accepts this additional business, its profits will:
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.
Markson Company had the following results of operations for the past year:
| Contribution margin income statement | Per Unit | Annual Total |
|---|---|---|
| Sales (9,000 units) | $ 20.00 | $ 180,000 |
| Variable costs | ||
| Direct materials | 4.25 | 38,250 |
| Direct labor | 6.00 | 54,000 |
| 2.00 | 18,000 | |
| Contribution margin | 7.75 | 69,750 |
| Fixed costs | ||
| Fixed overhead | 4.25 | 38,250 |
| Income | $ 3.50 | $ 31,500 |
A foreign company offers to buy 2,500 units at $14 per unit. In addition to variable manufacturing and administrative costs, selling these units would increase fixed overhead by $2,000 for the purchase of special tools. Markson’s annual productive capacity is 13,500 units. If Markson accepts this additional business, its profits will:
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