Bilal Manufacturing Co. uses direct costing. Following information have been received from their accounting records for a single product at the end of the year: Planned Production in units 30,000 Actual Production in units 30,000 Actual sales in units 30,000 Fixed Costs (Rs.) Variable Costs (Rs.) Raw Materials 15 Direct Labor 20 FOH 10 Rs. 90,000 or Rs. 3 per unit sold under the absorption costing Marketing and Administrative Costing Rs. 80,000 60,000 Note: Selling price of each single unit is Rs. 150. Required Prepare operating income statement by direct costing approach.
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.
Bilal Manufacturing Co. uses direct costing. Following information have been received from their accounting records for a single product at the end of the year:
Planned Production in units
30,000
Actual Production in units
30,000
Actual sales in units
30,000
Fixed Costs (Rs.)
Variable Costs (Rs.)
Raw Materials
15
Direct Labor
20
FOH
10
Rs. 90,000 or Rs. 3 per unit sold under the absorption costing
Marketing and Administrative Costing
Rs. 80,000
60,000
Note: Selling price of each single unit is Rs. 150.
Required
Prepare operating income statement by direct costing approach.
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