Wynter Company manufactures and sells a single product. Its budgeted production stands at 25 000 units. The following costs were incurred during 2017, the company’s first year of operations. Variable cost per unit Production Direct materials $18 Direct labour 7 Variable manufacturing overhead 2 Fixed costs per year Manufacturing overhead $150 000 Selling and administrative $110 000 During 2017, the company produced 20 000 units and sold 16,000 units. The selling price of the company’s product is $50 per unit Required: c) Assume that the company uses the Marginal costing method: i. Compute the cost of producing one unit of product. ii. Prepare an income statement for 2017. d) Reconcile the profits.
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.
Wynter Company manufactures and sells a single product. Its budgeted production stands at 25 000 units. The following costs were incurred during 2017, the company’s first year of operations.
Variable cost per unit
Production
Direct materials $18
Direct labour 7
Variable manufacturing
Fixed costs per year
Manufacturing overhead $150 000
Selling and administrative $110 000
During 2017, the company produced 20 000 units and sold 16,000 units.
The selling price of the company’s product is $50 per unit
Required:
c) Assume that the company uses the Marginal costing method:
i. Compute the cost of producing one unit of product.
ii. Prepare an income statement for 2017.
d) Reconcile the profits.
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