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A company budgeted $200,000 for production costs but incurred $220,000. What is

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Question: A company budgeted $200,000 for production costs but incurred $220,000. What is the variance?

Options:

  1. $20,000 Favorable
  2. $20,000 Unfavorable
  3. $200,000 Favorable
  4. $200,000 Unfavorable

Correct Answer: $20,000 Unfavorable

Solution: 

Variance = Actual Costs - Budgeted Costs = $220,000 - $200,000 = $20,000 Unfavorable.

A company budgeted $200,000 for production costs but incurred $220,000. What is

Practice Questions

Q1
A company budgeted $200,000 for production costs but incurred $220,000. What is the variance?
  1. $20,000 Favorable
  2. $20,000 Unfavorable
  3. $200,000 Favorable
  4. $200,000 Unfavorable

Questions & Step-by-Step Solutions

A company budgeted $200,000 for production costs but incurred $220,000. What is the variance?
  • Step 1: Identify the budgeted costs, which is $200,000.
  • Step 2: Identify the actual costs incurred, which is $220,000.
  • Step 3: Calculate the variance by subtracting the budgeted costs from the actual costs: $220,000 - $200,000.
  • Step 4: The result of the subtraction is $20,000.
  • Step 5: Since the actual costs are higher than the budgeted costs, the variance is considered unfavorable.
  • Variance Analysis – Variance analysis involves comparing budgeted costs to actual costs to determine financial performance.
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