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 unit cost factor on the change in variable cost of goods sold is:
A) $6,400 decrease
B) $6,400 increase
C) $7,200 increase
D) $7,200 decrease

Question

Quizplus · Accepted Answer

The unit cost factor is calculated by taking the difference in unit cost and multiplying it by the actual units sold: ($5.00 - $5.40) * 18,000 = -$0.40 * 18,000 = -$7,200, indicating a $7,200 decrease.

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