Hemlock Nutritional Supplements (HNS) provides you with the following accounting records on manufacturing cost for the most recent month: Direct materials $ 126,000 Direct labor 105,000 Variable overhead 92,400 Production was 60,000 units (cases). Fixed manufacturing overhead was $144,000. For the coming year, costs are expected to increase as follows: direct materials costs by 30 percent, excluding any effect of volume changes; direct labor by 6 percent; and fixed manufacturing overhead by 13.5 percent. Variable manufacturing overhead per unit is expected to remain the same. Required: Prepare a cost estimate for a volume level of 48,000 units of product in the upcoming month. Determine the costs per unit for the most recent month and for the upcoming 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.
Hemlock Nutritional Supplements (HNS) provides you with the following accounting records on
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