Budget Actual Total cost ($) 750,000 Quantity (kg) price ($/kg) 5,000 5,300 792,350 Actual vs Budget 300 42,350 150 149.5 -1 III. COST ANALYSIS Homework-Factor Analysis March Purchase price Consumption Cost April Purchase Consumption Cost quantity price quantity Materials X 2005/kg 3.5kg $700 Materials X 1955/kg 3.2 kg $624 Materials Y Variable labor 18 5/kg 20$/hour 12 kg $216 4 hours Unit Product Cost $80 $996 Materials Y 18 5/kg Variable labor 22 5/hour 11 kg $198 3.5 hours Unit Product Cost $77 $899 2. Production performance of April is very good. Compared with last month, production volume increased by 200 units up to 1200 units; Unit cost dropped by $97 down to $899. Total production cost of April is $1,078,800 and it of March is $996,000. Compared with last month, why unit product cost decreased but total production cost increased? For the change of total production cost (+$82,800), how much is due to the decrease in unit product cost? Which factor inside unit product cost contributes the biggest saving? About the question 2> For the change of total production cost (+$82,800), how much is due to the decrease in unit product cost? Total production cost = unit cost per product * product volume Volume impact unit cost per product of March * (volume of April - volume of March) = 996*(1200-1000) = 199,200 increase total cost Unit cost impact (unit cost per product of April - it of March) * volume of April = (899-996)*1200 = -116,400 decrease total cost Net impact = 199200-116400 =82,800, which is the variance of April production cost compared with it of March. Therefore, the answer of 1> and 2> is: in which total increase of production cost, factors (driver) play different role. Decrease of unit cost has total production cost dropped by 116,400, but volume increase has total production cost increased by 199,200. The latter one played stronger role to the total. Therefore, net result shows the increase in total production cost.