Harry makes many products including product R. The following relates to the whole company:
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.
- Harry makes many products including product R. The following relates to the whole company:
|
|
£ |
Cost driver |
|
General |
37,600 |
Direct labour hours |
|
Quality testing |
13,600 |
160 tests |
|
Set-ups |
44,000 |
44 set-ups |
|
Direct labour (£15 / hour) |
96,000 |
8,000 direct labour hours |
For product R, the following is budgeted:
|
Production |
200 |
|
Materials |
£15 per unit |
|
Direct labour |
0.5 hours |
|
Batch size |
50 units |
|
Set-ups |
1 per batch |
|
Inspections |
2 per batch |
Calculate the unit cost of product R, using activity base costing.
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