Quality Press Ltd produces a number of products, including a weekly newspaper called The QualityTimes, customised business cards and printed stationery.
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.
Quality Press Ltd produces a number of products, including a weekly newspaper called The QualityTimes, customised business cards and printed stationery. In preparing next year’s budget, the accountant is analysing the behaviour of the company’s major costs, listed below, and considering possible cost drivers.
(a)The cost of paper used in the Quality Times. Each edition comprises 40 pages.
(b)The cost of the card used for business cards.
(c)The cost of the lease on the company building.
(d)The cost of setting up the printing presses.
(e)The cost of leasing and running the trucks that deliver the QualityTimes to wholesale customers each week.Business cards and printed stationery are picked up by customers.
(f)The cost of the graphic artist who designs customers’ business cards. This person is not an employee and is paid a set amount per card design.
(g)The cost of an external marketing consultant who obtains advertising for the QualityTimes. This person is paid a percentage of advertising revenue.
Required:
Classify each of the above costs as fixed, variable or semi variable, and indicate an appropriate cost driver, where applicable.
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