Lecheflan Company is expected to operate at normal capacity and plans to manufacture 275,000 units of product for the year. The following estimates were determined for the company: Sales in units, 250,000; Selling price per unit, P35. Finished goods inventory on December 1 is estimated at 25,000 units costing, P500,000. Included in this amount is the fixed overhead amounting to P300,000. No changes in both fixed and variable cost are expected. How much is the difference between the absorption costing operating income and the variable costing operating income.
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.
Lecheflan Company is expected to operate at normal capacity and plans to manufacture 275,000 units of product for the year. The following estimates were determined for the company: Sales in units, 250,000; Selling price per unit, P35. Finished goods inventory on December 1 is estimated at 25,000 units costing, P500,000. Included in this amount is the fixed
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