Division C also produces two product lines. Because the division can sell all of the product it can produce, Dillard is expanding the plant and needs to decide which product line to emphasize. To make this decision, the division accountant assembled the following data: Per Unit K707 G582 Sales Price $ 84 $ 50 Variable Costs 24 21 Contribution Margin $ 60 $ 29 Contribution Margin Ratio 71% 58% After expansion, the factory will have a production capacity of 4,700 machine hours per month. The plant can manufacture cither 40 units of K707s or 62 units of G582s per machine hour. Identify the constraining factor for Division C. Prepare an analysis to show which product line to emphasize.
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.
3.Division C also produces two product lines. Because the division can sell all of the product it can produce, Dillard is expanding the plant and needs to decide which product line to emphasize. To make this decision, the division accountant assembled the following data:
| Per Unit | ||||
| K707 | G582 | |||
| Sales Price | $ 84 | $ 50 | ||
| Variable Costs | 24 | 21 | ||
| Contribution Margin | $ 60 | $ 29 | ||
| Contribution Margin Ratio | 71% | 58% |
After expansion, the factory will have a production capacity of 4,700 machine hours per month. The plant can manufacture cither 40 units of K707s or 62 units of G582s per machine hour.
- Identify the constraining factor for Division C.
- Prepare an analysis to show which product line to emphasize.
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