Compute the production-volume variance

Reference no: EM131821912

Question: Production-Volume Variance at L.A. Darling Company Review the Chapter 12 opening vignette on L.A. Darling Company (page 507 ). L.A. Darling receives about $6 billion of revenue each year from designing, manufacturing, and installing store fixtures in retail stores. Accounting for fixed manufacturing overhead is a challenge for the company. Suppose a manufacturing division of the company has the following budgeted costs for production of 800,000 shelving units in 2012:

During 2012, this division of L.A. Darling produced 850,000 of the shelving units and sold 820,000 of them for $450 million. Assume that L.A. Darling does not allocate selling or administrative costs to the individual products.

1. Compute the following budgeted unit costs for 2012:

2. Compute the production-volume variance for 2012. Be sure to label it favorable or unfavorable.

3. Compute the 2012 profit from the production and sales of the shelving using absorption costing. Ignore selling and administrative costs.

4. Compute the 2012 profit from the production and sales of the shelving using variable costing. Ignore selling and administrative costs.

5. Which measure of profit, absorption-costing profit or variable-costing profit, is a better measure of performance during 2012? Explain.

Reference no: EM131821912

Questions Cloud

Manufacture and distribute fabrics for use in clothing : The textile industry consists of firms that manufacture and distribute fabrics for use in clothing, furniture, carpeting, and so forth.

What are tie ratio and return on invested capital : What are its TIE ratio and its return on invested capital (ROIC)?

Discuss what is inventory shrinkage : What is inventory shrinkage. How can we keep this to a minimum

What annual gift tax exclusions are allowed : At that point, the trust terminates and the principal (corpus) is distributed to the son. What annual gift tax exclusions are allowed

Compute the production-volume variance : Production-Volume Variance at L.A. Darling Company Review the Chapter 12 opening vignette on L.A. Darling Company (page 507 ). L.A. Darling receives.

Suggest that strategic opportunities are available : Opportunities analysis seems to suggest that strategic opportunities are available in almost any industry, including declining ones. If that is true

Why is cost accumulation easier under process costing system : Why is cost accumulation easier under a process costing system than under a job order costing system? Discuss and use examples to support your discussion.

What should be the new annual installment : If the bank wishes to earn the same profit, what should be the new annual installment?

Potential threat in the five forces model : Government policies can have a significant impact on the average profitability of firms in an industry. Government, however, is not included

User Account

All Pages