Plummer Corporation has provided the following data for its two most recent years of operation: Selling price per unit $ 44 Manufacturing costs: Variable manufacturing cost per unit produced: Direct materials $ 9 Direct labor $6 Variable manufacturing overhead $ 4 Fixed manufacturing overhead per year $63,000 Selling and administrative expenses: Variable selling and administrative expense per unit sold $ 5 Fixed selling and administrative expense per year $66,000 Year 1 Year 2 Units in beginning inventory 0 2,000 Units produced during the year 9,000 7,000 Units sold during the year 7,000 8,000 Units in ending inventory 2,000 1,000 The net operating income (loss) under absorption costing in Year 2 is closest to: a. $92,000 b. $132,000 c. $26,000 d. $31,
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.
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