% in the month of sale and 40% in the month following the sale. 3. The company pays for 50% of its merchandise purchases in the month of the purchase and the remaining 50% in the month following the purchase. Required:
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.
PROBLEM 8-20
Refer to the data for Minden Company in Problem 8-19. The company is considering making the
following changes to the assumptions underlying its
1.Sales are budgeted for $220,000 for May.
2. Each month's credit sales are collected 60% in the month of sale and 40% in the month
following the sale.
3. The company pays for 50% of its merchandise purchases in the month of the purchase and
the remaining 50% in the month following the purchase.
Required:
Using the new assumptions described above, complete the following requirements:
4.
Using Schedule 9 as your guide, prepare a
5.
Prepare a budgeted balance sheet as of May 31.
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