A product uses 6 kilograms of raw material and takes two direct labour hours to make. Raw materials cost $2.50 per kilogram and direct labour is paid $4 per hour. Variable production overheads are 25% of labour costs. The budgeted fixed production costs for the year were $120,000 and budgeted labour hours were 20,000 hours. Fixed overheads are recovered on a direct labour hour basis. The full production cost per unit of product is: Question 4 options: 1) $25 2) $31 3) $35 4) $37
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 full production cost per unit of product is:
Question 4 options:
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