HIRAP corp. is capable of turning out 15 completed units evry 30 sec. The plant normally operates 5 days a week on two eight hour shift. each year the factory is closed 12 working days holiday. machinery is idle 750 hours for cleaning, oiling and maintenance. Normal sales averages 110,000 units a year over a five year period. the expected sales volume for the year is 112,500 units. the fixed cost of operating the plant amounted to 385,000 per year. a. compute the idle capacity cost under normal capacity if the plant operated at 3,400 hours/ b. compute the fixed unit cost under practical capacity
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.
HIRAP corp. is capable of turning out 15 completed units evry 30 sec. The plant normally operates 5 days a week on two eight hour shift. each year the factory is closed 12 working days holiday. machinery is idle 750 hours for cleaning, oiling and maintenance. Normal sales averages 110,000 units a year over a five year period. the expected sales volume for the year is 112,500 units. the fixed cost of operating the plant amounted to 385,000 per year.
a. compute the idle capacity cost under normal capacity if the plant operated at 3,400 hours/
b. compute the fixed unit cost under practical capacity
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