Lyon Productions manufactures two products, Chevalier and Dame. Estimates for the company’s products for next year are provided below: Chevalier Dame Estimated Production Volume 6 000 4 000 Direct Material Cost $30 / unit $50 / unit Direct Labour per Unit 3 hours @ $12 / hour 4 hours @ $12 / hour The company’s estimated overhead of $400 000 can be identified with three major activities: order processing ($75 000), machine processing ($280 000) and product inspection ($45 000). These activities are driven by number of orders processed, machine hours, and inspection hours respectively. Estimated activity levels for the next year are as follows: Chevalier Dame Total Orders Processed 300 200 500 Machine Hours 36 000 44 000 80 000 Inspection Hours 4 000 16 000 20 000 please calculate activity-based costing (ABC) assuming that Lyon Productions uses to apply overhead to production, calculate the total cost per unit for Chevalier and Dame if the estimated production volume is attained
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.
Lyon Productions manufactures two products, Chevalier and Dame. Estimates for the
company’s products for next year are provided below:
Chevalier Dame
Estimated Production
Volume
6 000 4 000
Direct Material Cost $30 / unit $50 / unit
Direct Labour per Unit 3 hours @ $12 / hour 4 hours @ $12 / hour
The company’s estimated
order processing ($75 000), machine processing ($280 000) and product inspection ($45 000).
These activities are driven by number of orders processed, machine hours, and inspection
hours respectively. Estimated activity levels for the next year are as follows:
Chevalier Dame Total
Orders Processed 300 200 500
Machine Hours 36 000 44 000 80 000
Inspection Hours 4 000 16 000 20 000
please calculate activity-based costing (ABC) assuming that Lyon Productions uses to apply overhead to
production, calculate the total cost per unit for Chevalier and Dame if the estimated
production volume is attained
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