Question

The actual variable cost of goods sold for a product was $140 per unit, while the planned variable cost of goods sold was $136 per unit. The volume increased by 2,400 units to 14,000 actual total units. Determine

(a) the variable cost quantity factor and
(b) the unit cost factor for variable cost of goods sold.

Answer 1

Answer: $326,000, $56,000

Step-by-step explanation:

Given the following ;

Actual variable cost = $140

Planned variable cost = $136

Actual total units = 14000

Unit increase = 2000

Therefore, the total planned unit is given by;

Actual total unit - unit increase

14000 - 2400 = 11,600 unit

A. Variable cost quantity factor is given by;

Unit increase × planned variable cost

(11600 - 14000) × $136

-2400 × $136 = 326,000

B. Unit cost factor for variable cost of goods sold is given by;

(planned variable cost - actual variable cost) × actual total units

($136 - $140) × 14000

$4 × 14000 = $56,000

Answer 2

$326,400 is the variable cost quantity factor while $56,000 is the unit cost factor

Step-by-step explanation:

The variable cost quantity factor is a measure of the difference between the planned and actual units multiplied by planned variable cost.

That is Variable Cost quantity factor = (planned units - actual units sold) x planned variable cost

= (14000-2400) - 14000) x $136

= (11600 - 14000) x $136

= -$326,400

Unit Cost factor = $(140 - 136) x 14000 units

=$56,000