itner Corporation manufactures a product that has the following costs: Per Unit Per Year Direct materials $ 22.70 Direct labor $ 14.20 Variable manufacturing overhead $ 2.60 Fixed manufacturing overhead $ 450,000 Variable selling and administrative expenses $ 2.00 Fixed selling and administrative expenses $ 592,100 The company uses the absorption costing approach to cost-plus pricing as described in the text. The pricing calculations are based on budgeted production and sales of 29,500 units per year. The company has invested $360,500 in this product and expects a return on investment of 9%. Required: a. Compute the markup on absorption cost. (Round your intermediate and final answer to 2 decimal places.) b. Compute the selling price of the product using the absorption costing approach. (Round your intermediate and final answer to 2 decimal places.)
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.
Ritner Corporation manufactures a product that has the following costs:
| Per Unit | Per Year | |||||
| Direct materials | $ |
22.70 |
||||
| Direct labor | $ |
14.20 |
||||
| Variable manufacturing |
$ |
2.60 |
||||
| Fixed manufacturing overhead | $ |
450,000 |
||||
| Variable selling and administrative expenses | $ |
2.00 |
||||
| Fixed selling and administrative expenses | $ |
592,100 |
||||
The company uses the absorption costing approach to cost-plus pricing as described in the text. The pricing calculations are based on budgeted production and sales of 29,500 units per year.
The company has invested $360,500 in this product and expects a
Required:
a. Compute the markup on absorption cost. (Round your intermediate and final answer to 2 decimal places.)
b. Compute the selling price of the product using the absorption costing approach. (Round your intermediate and final answer to 2 decimal places.)
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