Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the company's two product lines appear below: Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annual production De luxe Estimated total manufacturing overhead Estimated total direct labor-hours $ 67.00 $ 25.00 0.70 DLHS 10,000 units Standard $ 55.00 $ 20.40 1.40 DLHS 50,000 units The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below: $ 505,000 77,000 DLHs Required: 1. Determine the unit product costs of the Deluxe and Standard products under the company's traditional costing system. 2. The company is considering replacing its traditional costing system with an activity-based absorption costing system that would have the following three activity cost pools: Estimated Overhead Cost $ 308,000 129,000 68,000 $ 505,000 Deluxe 7,000 200 30 Expected Activity Activity Cost Pools (and Activity Measures) Supporting direct labor (direct labor-hours) Batch setups (setups) Safety testing (tests) Total manufacturing overhead cost Determine the unit product costs of the Deluxe and Standard products under the activity-based absorption costing system. Standard 70,000 100 70 Total 77,000 300 100
Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the company's two product lines appear below: Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annual production De luxe Estimated total manufacturing overhead Estimated total direct labor-hours $ 67.00 $ 25.00 0.70 DLHS 10,000 units Standard $ 55.00 $ 20.40 1.40 DLHS 50,000 units The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below: $ 505,000 77,000 DLHs Required: 1. Determine the unit product costs of the Deluxe and Standard products under the company's traditional costing system. 2. The company is considering replacing its traditional costing system with an activity-based absorption costing system that would have the following three activity cost pools: Estimated Overhead Cost $ 308,000 129,000 68,000 $ 505,000 Deluxe 7,000 200 30 Expected Activity Activity Cost Pools (and Activity Measures) Supporting direct labor (direct labor-hours) Batch setups (setups) Safety testing (tests) Total manufacturing overhead cost Determine the unit product costs of the Deluxe and Standard products under the activity-based absorption costing system. Standard 70,000 100 70 Total 77,000 300 100
Chapter1: Financial Statements And Business Decisions
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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.
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