Ski Golf Guard Fishing Guard $255 Guard Selling price per unit... Variable cost per unit . Plastic injection molding machine processing time required to produce one unit.. Pounds of plastic pellets per unit.. $200 $300 $140 $60 $55 2 minutes 5 minutes 7 pounds 4 pounds 8 pounds 4 minutes
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.
Volume Trade-Off Decisions
Outdoor Luggage, Inc., makes high-end hard-sided luggage for sports equipment. Data concerning three of the company’s most popular models appear below.
1. If we assume that the total time available on the plastic injection molding machine is the constraint in the production process, how much contribution margin per minute of the constrained resource is earned by each product?
2. Which product offers the most profitable use of the plastic injection molding machine?
3. If we assume that a severe shortage of plastic pellets has required the company to cut back its production so much that its new constraint has become the total available pounds of plastic pellets, how much contribution margin per pound of the constrained resource is earned by each product?
4. Which product offers the most profitable use of the plastic pellets?
5. Which product has the largest contribution margin per unit? Why wouldn’t this product be the most profitable use of the constrained resource in either case?
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