ABC Corporation produces a single product. The following cost structure applied to its first year of operations: Variable costs: SG&A P2 per unit Production P4 per unit Fixed costs (total cost incurred for the year): SG&A P14,000 Production P20,000 Assume for this question only that ABC Corporation produced 5,000 units and sold 4,500 units in the current year. If ABC uses absorption costing, it would deduct period costs A.34,000 B.27,000 C.23,000 D.24,000
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.
ABC Corporation produces a single product. The following cost structure applied to its first year of operations:
|
Variable costs: |
|
|
SG&A |
P2 per unit |
|
Production |
P4 per unit |
|
Fixed costs (total cost incurred for the year): |
|
|
SG&A |
P14,000 |
|
Production |
P20,000 |
Assume for this question only that ABC Corporation produced 5,000 units and sold 4,500 units in the current year. If ABC uses absorption costing, it would deduct period costs
A.34,000
B.27,000
C.23,000
D.24,000
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