In September, Larson Inc. sold 42,000 units of its only product for $255,000 and incurred a total cost of $236,300, of which $26,100 is fixed costs. The flexible budget for September showed total sales of $310,000. Among variances of the period were: Total variable cost flexible budget variance = $8,400 unfavorable Total flexible-budget variance = $66,400 unfavorable Sales volume variance in terms of contribution margin = $28,300 unfavorable The actual amount of operating income earned in September was: a. $18,700 b. $19,500 c. $20,300 d. $21,100 e. $21,900
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.
In September, Larson Inc. sold 42,000 units of its only product for $255,000 and incurred a total cost of $236,300, of which $26,100 is fixed costs. The flexible budget for September showed total sales of $310,000. Among variances of the period were:
Total variable cost flexible
Total flexible-budget variance = $66,400 unfavorable
Sales volume variance in terms of contribution margin = $28,300 unfavorable
The actual amount of operating income earned in September was:
a. $18,700
b. $19,500
c. $20,300
d. $21,100
e. $21,900
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