Zahra's Decoratives produces and sells a decorative pillow for $100 per unit. In the first month of operation, 1,800 units were produced and 1,750 units were sold. Budgeted production was 2,000 units. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes: Variable manufacturing costs $22 .10 per unit Variable marketing costs $ 3 .90 per unit Fixed manufacturing costs $13 .00 per unit Administrative expenses, all fixed $19 .50 per unitEnding inventories: Direct materials -0- WIP -0- Finished goods 250 units What is the operating income using absorption costing? Group of answer choices $65,125 $60,125 $65,000 $65,150
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.
Zahra's Decoratives produces and sells a decorative pillow for $100 per unit. In the first month of operation, 1,800 units were produced and 1,750 units were sold. Budgeted production was 2,000 units. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes:
| Variable |
$22 | .10 per unit |
| Variable marketing costs | $ 3 | .90 per unit |
| Fixed manufacturing costs | $13 | .00 per unit |
| Administrative expenses, all fixed | $19 | .50 per unit |
| Direct materials | -0- |
| WIP | -0- |
| Finished goods | 250 units |
What is the operating income using absorption costing?
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