If variable cost of goods sold totaled $90,000 for the year (18,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,400 (16,000 units at $5.40 each), the effect of the quantity factor on the change in variable cost of goods sold is:
A) $10,800 decrease
B) $10,800 increase
C) $10,000 increase
D) $10,000 decrease

Question

Quizplus · Accepted Answer

The quantity factor is the number of units produced and sold. In this case, the company sold 18,000 units (actual) and planned to sell 16,000 units (budgeted).

To calculate the effect of the quantity factor, we need to isolate the impact of the change in units sold.

Variable cost per unit: 
Actual: $5.00 
Budgeted: $5.40

Thus, the variable cost per unit decreased.

To calculate the expected variable cost: 
Actual: 18,000 units x $5.00 = $90,000 
Budgeted: 16,000 units x $5.40 = $86,400

The difference is $3,600.

To isolate the impact of the quantity factor, we can calculate the expected cost assuming no change in variable cost per unit: 
16,000 units x $5.00 = $80,000 
The actual variable cost of goods sold exceeds the expected cost by $10,000.

Therefore, the effect of the quantity factor on the change in variable cost of goods sold is an increase of $10,800 (difference between $86,400 budgeted and $80,000 expected).

If Variable Cost of Goods Sold Totaled $90,000 for the Year