Ivanhoe Company manufactures cappuccino makers. For the first eight months of 2022, the company reported the following operating results while operating at 80% of plant capacity: Sales (540,000 units) Cost of goods sold Gross profit Operating expenses Net income $97,200,000 58,320,000 38,880,000 25,920,000 $12,960,000 An analysis of costs and expenses reveals that variable cost of goods sold is $95 per unit and variable operating expenses are $35 per unit In September, Ivanhoe Company receives a special order for 43,200 machines at $135 each from a major coffee shop franchise. Acceptance of the order would result in $10,800 of shipping costs but no increase in fixed expenses.

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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.