The costs incurred in the manufacture of 75,000 units of a product are: Direct materials $80,000 Direct labour $15,000 Variable overheads $32,000 Fixed overheads $130,000 If output increases by 15%, what will be the effect, if any, on the variable cost per unit? Show solution
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.
The costs incurred in the manufacture of 75,000 units of a product are:
|
Direct materials |
$80,000 |
|
Direct labour |
$15,000 |
|
Variable |
$32,000 |
|
Fixed overheads |
$130,000 |
If output increases by 15%, what will be the effect, if any, on the variable cost per unit? Show solution
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