antrovitz Company is a manufacturer of industrial components. One of its products, AP110, is used as a subcomponent i
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.
Relevant costs; special order pricing
Kantrovitz Company is a manufacturer of industrial components. One of its products, AP110, is used as a subcomponent in appliance manufacturing. This product has the following information per unit:
| Selling price | $150.00 |
| Costs: | |
| Direct material | $20.00 |
| Direct labor | 15.00 |
| Variable manufacturing |
12.00 |
| Fixed manufacturing overhead | 30.00 |
| Shipping and handling | 3.00 |
| Fixed selling and administrative | 10.00 |
| Total per-unit cost | $90.00 |
a. Kantrovitz has received a special, one-time order for 1,000 AP110 parts. Assuming Kantrovitz has excess capacity, what is the minimum price that is acceptable for beginning negotiations on this order? $Answer
b. Kantrovitz has 5,000 units of AP110 in inventory that have some defects. The units cannot be sold through regular channels without a significant price reduction. What per-unit cost figure is relevant for setting a minimum selling price on these units? $Answer
c. During the next year, sales of AP110 are expected to be 10,000 units. All costs will remain the same except that fixed manufacturing overhead will increase by 20 percent and direct material will increase by 10 percent. The selling price per unit for next year will be $160. Based on these data, calculate the total contribution margin generated by part AP110. $Answer
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
