Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the company’s two product lines appear below: Deluxe Standard Direct materials per unit $ 69.00 $ 57.00 Direct labor per unit $ 27.00 $ 22.00 Direct labor-hours per unit 0.70 DLHs 1.40 DLHs Estimated annual production 10,000 units 50,000 units The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below: Estimated total manufacturing overhead $ 667,000 Estimated total direct labor-hours 77,000 DLHs
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.
Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the company’s two product lines appear below:
| Deluxe | Standard | |||
|---|---|---|---|---|
| Direct materials per unit | $ 69.00 | $ 57.00 | ||
| Direct labor per unit | $ 27.00 | $ 22.00 | ||
| Direct labor-hours per unit | 0.70 | DLHs | 1.40 | DLHs |
| Estimated annual production | 10,000 | units | 50,000 | units |
The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below:
| Estimated total manufacturing overhead | $ 667,000 | |
|---|---|---|
| Estimated total direct labor-hours | 77,000 | DLHs |
Required:
- Determine the unit product costs of the Deluxe and Standard products under the company’s traditional costing system.
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