What ais the production volume variances for Paynesville?
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.
Exercise 16-46 (Algo) Fixed Cost Variances (LO 16-6)
Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The
| Direct materials | (2 pounds @ $17) | $ | 34 | |
| Direct labor | (0.5 hours @ $50) | 25 | ||
Variable overhead is applied based on direct labor hours. The variable overhead rate is $150 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $23 per unit. All non-
At the end of the year, the costs analyst reported that the sales activity variance for the year was $816,000 unfavorable.
The following is the actual income statement (in thousands of dollars) for the year.
| Sales revenue | $ | 32,718 | |
| Less variable costs | |||
| Direct materials | 3,508 | ||
| Direct labor | 2,960 | ||
| Variable overhead | 8,530 | ||
| Total variable costs | $ | 14,998 | |
| Contribution margin | $ | 17,720 | |
| Less fixed costs | |||
| Fixed manufacturing overhead | 3,130 | ||
| Non-manufacturing costs | 1,360 | ||
| Total fixed costs | $ | 4,490 | |
| Operating profit | $ | 13,230 | |
Required:
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