RE: Setups Costs and Lot Size
Adding to what Guy has stated, this is the reason people use Standard Costing. If you produce more than your Std. Cost's Lot Size, your setup costs will decrease because the fixed cost of setup is spread out over more units. If you change the quantity built for a given Production Run, you still put the Finished Good into inventory at the Standard Cost.
Your variance is the over/under of how well you did against your Standard. The same is true on scrap, sometimes things happen that cause the production not to run as planned, which also creates a variance. Standard Costing takes out the unknown to keep Item Costs consistent.
If you want the system to track actual costs on the Items as they are produced into inventory, you would want to look into Specific (requires Item Tracking) or FIFO Costing Methods.
