Question

Puvo, incorporated, manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. the company uses a standard cost system and has established the following standards for one unit of product: during march, the following activity was recorded by the compnay: the company produced 2,500 units during the month, a total of 19,500 pounds of material were purchased at a cost of $13,680

Answer 1

The question pertains to the calculation of average variable cost within the context of manufacturing, where such costs vary with output levels and include expenses like labor and raw materials.

Step-by-step explanation:

The question relates to calculating average variable cost in a manufacturing setting, where it is important to consider the relationship between variable costs and output levels. Variable costs, such as labor and raw materials, change with the level of output. Therefore, to calculate the average variable cost, you divide the total variable costs by the number of units produced.

Specifically, in manufacturing contexts where overhead is applied based on labor hours and labor is considered a variable cost, the increase in output commonly necessitates additional labor hours. Advanced planning around labor and machine use can offset some of the variable costs increases, especially in response to changes in labor prices due to union negotiations.