Outdoor Devices Inc. manufactures sport hunting equipment. The company's operations had the following results for 2012. Actual production volume approximated normal levels. F = favourable variance, meaning actual costs were below standard; U = unfavourable variance, meaning actual costs exceeded standard. Assume all variances are considered to be material. Required:
a. Determine the amount that Outdoor should include in the cost of inventories produced in the year.
b. If actual production volume were higher than normal, what would be the effect on the cost of inventories on a per unit basis? What if actual production volume were lower than normal?

Question

Outdoor Devices Inc. manufactures sport hunting equipment. The company's operations had the following results for 2012. Actual production volume approximated normal levels. F = favourable variance, meaning actual costs were below standard; U = unfavourable variance, meaning actual costs exceeded standard. Assume all variances are considered to be material.  Required:
a. Determine the amount that Outdoor should include in the cost of inventories produced in the year.
b. If actual production volume were higher than normal, what would be the effect on the cost of inventories on a per unit basis? What if actual production volume were lower than normal?

Quizplus · Accepted Answer

The Answer of Outdoor Devices Inc. manufactures sport hunting equipment. The company's operations had the following results for 2012. Actual production volume approximated normal levels. F = favourable variance, meaning actual costs were below standard; U = unfavourable variance, meaning actual costs exceeded standard. Assume all variances are considered to be material.  Required:
a. Determine the amount that Outdoor should include in the cost of inventories produced in the year.
b. If actual production volume were higher than normal, what would be the effect on the cost of inventories on a per unit basis? What if actual production volume were lower than normal?