If variable cost of goods sold totaled $80,000 for the year (16,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,250 (15,000 units at $5.75 each), the effect of the unit cost factor on the change in variable cost of goods sold is:
A) $12,000 increase
B) $5,750 decrease
C) $12,000 decrease
D) $5,750 increase

Question

Quizplus · Accepted Answer

The unit cost factor is the change in unit price from the planned amount to the actual amount. In this case, the unit cost factor is $5.75 - $5.00 = $0.75. Multiplying this by the actual number of units sold (16,000), we get $12,000. However, we are looking for the effect on the change in variable cost of goods sold, which is the difference between the actual and planned amounts. Since the actual amount is lower than the planned amount, we know that the effect of the unit cost factor must be a decrease in variable cost. Therefore, the correct answer is C) $12,000 decrease.

If Variable Cost of Goods Sold Totaled $80,000 for the Year