Diego Company manufactures one product that is sold for $81 per unit in two geographic regions-East and West. The following information pertains to the company's first year of operations in which it produced 52,000 units and sold 47,000 units. Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expense $ 20 $ 20 $ 4 $ 6 $ 936,000 $ 552,000 The company sold 35,000 units in the East region and 12,000 units in the West region. It determined $260,000 of its fixed selling and administrative expense is traceable to the West region, $210,000 is traceable to the East region, and the remaining $82,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product.
Diego Company manufactures one product that is sold for $81 per unit in two geographic regions-East and West. The following information pertains to the company's first year of operations in which it produced 52,000 units and sold 47,000 units. Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expense $ 20 $ 20 $ 4 $ 6 $ 936,000 $ 552,000 The company sold 35,000 units in the East region and 12,000 units in the West region. It determined $260,000 of its fixed selling and administrative expense is traceable to the West region, $210,000 is traceable to the East region, and the remaining $82,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product.
Chapter1: Financial Statements And Business Decisions
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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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Diego Company manufactures one product that is sold for $81 per unit in two geographic regions-East and West. The
following information pertains to the company's first year of operations in which it produced 52,000 units and sold 47,000
units.
Variable costs per unit:
Manufacturing:
Direct materials
Direct labor
Variable manufacturing overhead
Variable selling and administrative
Fixed costs per year:
Fixed manufacturing overhead
Fixed selling and administrative expense
$ 20
$ 20
$ 4
$ 6
$ 936,000
$ 552,000
The company sold 35,000 units in the East region and 12,000 units in the West region. It determined $260,000 of its fixed
selling and administrative expense is traceable to the West region, $210,000 is traceable to the East region, and the
remaining $82,000 is a common fixed expense. The company will continue to incur the total amount of its fixed
manufacturing overhead costs as long as it continues to produce any amount of its only product.
4. What is the company's net operating income (loss) under variable costing?
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