Blaster Corporation manufactures hiking boots. For the coming year, the company has budgeted the following costs for the production and sales of 30,000 pairs of boots Budgeted costs Budgeted costs per pair % of costs considered variable Direct Materials $630,000 $21 100% Direct Labor 300,000 10 100 Manufacutring overhead (fixed and variable) 720,000 24 25 Selling and admin expenses 600,000 20 20 Totals $2,250,000 $75 A. Compute the sales price per unit that would result in a budgeted operating income of $900,000 assuming the company produces and sells 30,000 pairs Assume the company decides to sell the boots at a unit price of $121 per pair B-1.Compute the total fixed costs budgeted for the year B-2. Compute the variable cost per unit B-3. Compute the contribution margin per pair of boots B-4 Compute the number of pairs that must be produced and sold annually to break even at a sales price of $121 per pair
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.
Blaster Corporation manufactures hiking boots. For the coming year, the company has budgeted the following costs for the production and sales of 30,000 pairs of boots
| Budgeted costs | Budgeted costs per pair | % of costs considered variable | |
| Direct Materials | $630,000 | $21 | 100% |
| Direct Labor | 300,000 | 10 | 100 |
| Manufacutring |
720,000 | 24 | 25 |
| Selling and admin expenses | 600,000 | 20 | 20 |
| Totals | $2,250,000 | $75 |
A. Compute the sales price per unit that would result in a budgeted operating income of $900,000 assuming the company produces and sells 30,000 pairs
Assume the company decides to sell the boots at a unit price of $121 per pair
B-1.Compute the total fixed costs budgeted for the year
B-2. Compute the variable cost per unit
B-3. Compute the contribution margin per pair of boots
B-4 Compute the number of pairs that must be produced and sold annually to break even at a sales price of $121 per pair
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