George Caloz & Frères, located in Grenchen, Switzerland, makes luxury custom watches in small lots. One of the company’s products, a platinum diving watch, goes through an etching process. The company has recorded etching costs as follows over the last six weeks: Week Units Total Etching Cost 1 4 $ 18 2 3 17 3 8 25 4 6 20 5 7 24 6 2 16 30 $ 120 For planning purposes, management would like to know the variable etching cost per unit and the total fixed etching cost per week. Exercise 5A-5 Part 3 (Static) 3. If the company processes five units next week, what would be the expected total etching cost?
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
George Caloz & Frères, located in Grenchen, Switzerland, makes luxury custom watches in small lots. One of the company’s products, a platinum diving watch, goes through an etching process. The company has recorded etching costs as follows over the last six weeks:
| Week | Units | Total Etching Cost | ||||||
| 1 | 4 | $ | 18 | |||||
| 2 | 3 | 17 | ||||||
| 3 | 8 | 25 | ||||||
| 4 | 6 | 20 | ||||||
| 5 | 7 | 24 | ||||||
| 6 | 2 | 16 | ||||||
| 30 | $ | 120 | ||||||
For planning purposes, management would like to know the variable etching cost per unit and the total fixed etching cost per week.
Exercise 5A-5 Part 3 (Static)
3. If the company processes five units next week, what would be the expected total etching cost?
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