Lee Enterprises produces two models of lawn tractor: SL1 and SL2. The models are both produced in the company’s Louisville factory and go through identical assembly operations. The difference is in the quality (hence, cost) of the parts used. The following data are available for November, the latest month for which information is available: SL1 SL2 Total Number assembled 1,650 2,150 3,800 Materials cost per tractor $ 1,250 $ 1,750 Other costs: Direct labor $ 1,550,000 Supplies 550,000 Other overhead 2,840,000 Required: Lee Enterprises uses operations costing and assigns conversion costs based on the number of units assembled. Compute the cost of each model assembled in November. SL1 SL2 Total Operation Cost Materials cost Total cost Number of units Unit cost
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.
- Lee Enterprises produces two models of lawn tractor: SL1 and SL2. The models are both produced in the company’s Louisville factory and go through identical assembly operations. The difference is in the quality (hence, cost) of the parts used. The following data are available for November, the latest month for which information is available:
|
|
SL1 |
SL2 |
Total |
||||||
|
Number assembled |
|
1,650 |
|
|
2,150 |
|
|
3,800 |
|
|
Materials cost per tractor |
$ |
1,250 |
|
$ |
1,750 |
|
|
|
|
|
Other costs: |
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|
|
|
|
|
|
|
|
|
Direct labor |
|
|
|
|
|
|
$ |
1,550,000 |
|
|
Supplies |
|
|
|
|
|
|
|
550,000 |
|
|
Other |
|
|
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|
|
|
|
2,840,000 |
|
Required:
- Lee Enterprises uses operations costing and assigns conversion costs based on the number of units assembled. Compute the cost of each model assembled in November.
|
|
SL1 |
SL2 |
Total |
|
Operation Cost |
|
|
|
|
Materials cost |
|
|
|
|
Total cost |
|
|
|
|
Number of units |
|
|
|
|
Unit cost |
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|
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