Sales (38,200 units @ S20) Less: Cost of goods sold Gross margin Less: Selling and administrative expenses (all fixed) Operating income $764,000 546,260 $217,740 184,500 $ 33,240
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.
During its first year of operations, Snobegon, Inc. (located in Lake Snobegon, Minnesota), produced 40,000 plastic snow scoops. Snow scoops are oversized shovel-type scoops that are used to push snow away. Unit sales were 38,200 scoops. Fixed
Required:
1. Calculate the cost of the firm’s ending inventory under absorption costing. What is the cost
of the ending inventory under variable costing? (Round unit costs to five significant digits.)
2. Prepare a variable-costing income statement. Reconcile the difference between the two
income figures.
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