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For example, assume that the standard cost of direct labor per unit of product A is 2.5 hours x $14 = $35. Assume further that during the month of March the company recorded 4500 hours of direct labor time. The actual cost of this labor time was $64,800, or an average of $14.40 per hour. The company produced 2000 units of product A during the ...
In economics, the marginal cost is the change in the total cost that arises when the quantity produced is increased, i.e. the cost of producing additional quantity. [1] In some contexts, it refers to an increment of one unit of output, and in others it refers to the rate of change of total cost as output is increased by an infinitesimal amount.
The total cost curve, if non-linear, can represent increasing and diminishing marginal returns.. The short-run total cost (SRTC) and long-run total cost (LRTC) curves are increasing in the quantity of output produced because producing more output requires more labor usage in both the short and long runs, and because in the long run producing more output involves using more of the physical ...
Thus, the total fixed cost equals Kr. Labor is the variable input, meaning that the amount of labor used varies with the level of output. In the short run, the only way to vary output is by varying the amount of the variable input. Labor usage is denoted L and the per unit cost, or wage rate, is denoted w, so the variable cost is Lw.
The marginal profit per unit of labor equals the marginal revenue product of labor minus the marginal cost of labor or M π L = MRP L − MC L A firm maximizes profits where M π L = 0. The marginal revenue product is the change in total revenue per unit change in the variable input assume labor. [10] That is, MRP L = ∆TR/∆L.
Standard Costing is a technique of Cost Accounting to compare the actual costs with standard costs (that are pre-defined) with the help of Variance Analysis. It is used to understand the variations of product costs in manufacturing. [6] Standard costing allocates fixed costs incurred in an accounting period to the goods produced during that period.
In microeconomics, the marginal factor cost (MFC) is the increment to total costs paid for a factor of production resulting from a one-unit increase in the amount of the factor employed. [1] It is expressed in currency units per incremental unit of a factor of production (input), such as labor , per unit of time.
Inputs include labor, capital, materials, power and land and buildings. Variable inputs are inputs whose use vary with output. Conventionally the variable input is assumed to be labor. [5] Total variable cost (TVC) is the same as variable costs. [5] Fixed cost (TFC) are the costs of the fixed assets those that do not vary with production. [6]