Snyder Company produced 90,000 units during its first year of operations and sold 87,000 at $21.80 per unit. The company chose practical activity - at 90,000 units - to compute its predetermined overhead rate. Manufacturing costs are as follows: Direct materials $540,000 Direct labor 99,000 Expected and actual variable overhead 369,000 Expected and actual fixed overhead 468,000 Required: Calculate the 1) unit cost and 2) cost of finished goods inventory under absorption costing. Calculate the 1) unit cost and 2) cost of finished goods inventory under variable costing. What is the amount to be used to report the cost of finished goods inventory to external parties. Why?
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.
Snyder Company produced 90,000 units during its first year of operations and sold 87,000 at $21.80 per unit. The company chose practical activity - at 90,000 units - to compute its predetermined overhead rate.
Direct materials $540,000
Direct labor 99,000
Expected and actual variable overhead 369,000
Expected and actual fixed overhead 468,000
Required:
- Calculate the 1) unit cost and 2) cost of finished goods inventory under absorption costing.
- Calculate the 1) unit cost and 2) cost of finished goods inventory under variable costing.
- What is the amount to be used to report the cost of finished goods inventory to external parties. Why?
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