C & W Corporation manufactures and sells a single product. Its budgeted production stands at 50 000 units. The following costs were incurred during 2022, the company’s first year of operations. Variable cost per unit Production Direct materials $36 Direct labour 14 Variable manufacturing overhead 4 Fixed Costs Per Year Manufacturing overhead $300 000 Selling and administrative $220 000 During 2022, the company produced 40 000 units and sold 32,000 units. The selling price of the company’s product is $100 per unit Required: c. Assume that the company uses the Marginal costing method: i. Compute the cost of producing one unit of product. ii. Prepare an income statement for 2022. d. Reconcile the profits.
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.
C & W Corporation manufactures and sells a single product. Its budgeted production stands at 50 000 units. The following costs were incurred during 2022, the company’s first year of operations.
Variable cost per unit
Production
Direct materials $36
Direct labour 14
Variable manufacturing
Fixed Costs Per Year
Manufacturing overhead $300 000
Selling and administrative $220 000
During 2022, the company produced 40 000 units and sold 32,000 units. The selling price of the company’s product is $100 per unit
Required:
c. Assume that the company uses the Marginal costing method:
i. Compute the cost of producing one unit of product.
ii. Prepare an income statement for 2022.
d. Reconcile the profits.
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