A business produces one product which requires the following inputs: Direct Materials 6 kg at S 4.80 per kg Direct labour 4 hour at $7 per hour Building cost S 18,000 per period Leased machine $600 for every 600 units (each machine has a capacity of 600 units) Store Cost $3,000 per period plus $3 per unit a. What is the total cost of production and the cost per unit at each of the following production levels: -1000 units -2000 units b. Explain why the cost per unit is different at each level of production
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.
A business produces one product which requires the following inputs:
Direct Materials 6 kg at S 4.80 per kg
Direct labour 4 hour at $7 per hour
Building cost S 18,000 per period
Leased machine $600 for every 600 units (each machine has a capacity of 600 units)
Store Cost $3,000 per period plus $3 per unit
a. What is the total cost of production and the cost per unit at each of the following production levels:
-1000 units
-2000 units
b. Explain why the cost per unit is different at each level of production
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