Diana Company has the following information available regarding costs at various levels of monthly production: 7,000 units 10,000 units $ 70,000 56,000 21,000 12,000 10,000 32,000 15,000 1,600 2,000 Production volume Direct materials Direct labor Indirect materials Supervisors' salaries Depreciation on plant Maintenance Utilities Insurance on plant and equipment Property taxes on plant $100,000 80,000 30,000 12,000 10,000 44,000 21,000 1,600 2,000
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Develop an equation for total monthly production costs.
Total Monthly Production costs = Fixed Costs + Variable Costs
= _____________ + ($ per unit X Number of units)
Predict total costs for a monthly production volume of 9,000 units.
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