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If a company has a budgeted profit of $30,000 and actual profit of $25,000, what
If a company has a budgeted profit of $30,000 and actual profit of $25,000, what is the profit variance?
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Q1
If a company has a budgeted profit of $30,000 and actual profit of $25,000, what is the profit variance?
$5,000 Favorable
$5,000 Unfavorable
$10,000 Favorable
$10,000 Unfavorable
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Profit variance = Actual Profit - Budgeted Profit = $25,000 - $30,000 = -$5,000, which is unfavorable.
Questions & Step-by-step Solutions
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Q: If a company has a budgeted profit of $30,000 and actual profit of $25,000, what is the profit variance?
Solution:
Profit variance = Actual Profit - Budgeted Profit = $25,000 - $30,000 = -$5,000, which is unfavorable.
Steps: 6
Show Steps
Step 1: Identify the budgeted profit, which is $30,000.
Step 2: Identify the actual profit, which is $25,000.
Step 3: Use the formula for profit variance: Profit Variance = Actual Profit - Budgeted Profit.
Step 4: Substitute the values into the formula: Profit Variance = $25,000 - $30,000.
Step 5: Calculate the result: $25,000 - $30,000 = -$5,000.
Step 6: Interpret the result: A negative variance of -$5,000 means the profit is lower than expected, which is unfavorable.
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