Home Insert Page Layout Formulas Data 1 Units produced 2 Units sold 3 Selling price 4 Variable costs: 21,000 18,500 432 Manufacturing cost per unit produced: Direct materials 33 23 Direct manufacturing labor Manufacturing overhead Marketing cost per unit sold 10 Fixed costs: 62 46 $1,550,000 Manufacturing costs 11 Administrative costs 906,300 12 Marketing costs 13 1,479,000 1. Prepare a 2017 income statement for Horace Company using variable costing. 2. Prepare a 2017 income statement for Horace Company using absorption costing. 3. Explain the differences in operating incomes obtained in requirements 1 and 2. 4. Horace's management is considering implementing a bonus for its supervisors based on gross margin under absorption costing. What incentives will this bonus plan create for the supervisors? What modi- fications could Horace management make to improve such a plan? Explain briefly. Required %24
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.
Absorption versus variable costing. Horace Company manufactures a professional-grade vacuum cleaner and began operations in 2017. For 2017, Horace budgeted to produce and sell 25,000 units. The company had no price, spending, or efficiency variances and writes off production-volume variance to cost of goods sold. Actual data for 2017 are given as follows:
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