manufacturer reports the following information below for its first three years in operation. Year 1 Year 2 Year 3 Variable costing income $ 80,000 $ 113,000 $ 119,000 Beginning finished goods inventory (units) 0 840 520 Ending finished goods inventory (units) 840 520 0 Fixed overhead per unit $ 9.00 $ 9.00 $ 9.00 Income for year 2 using absorption costing is: Multiple Choice $122,360. $119,000. $110,120. $113,000. $114,320.
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.
A manufacturer reports the following information below for its first three years in operation.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Variable costing income | $ 80,000 | $ 113,000 | $ 119,000 |
| Beginning finished goods inventory (units) | 0 | 840 | 520 |
| Ending finished goods inventory (units) | 840 | 520 | 0 |
| Fixed overhead per unit | $ 9.00 | $ 9.00 | $ 9.00 |
Income for year 2 using absorption costing is:
-
$122,360.
-
$119,000.
-
$110,120.
-
$113,000.
-
$114,320.
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