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If a company has a budgeted cost of $100,000 and an actual cost of $90,000, what

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Question: If a company has a budgeted cost of $100,000 and an actual cost of $90,000, what is the cost variance?

Options:

  1. $10,000 Favorable
  2. $10,000 Unfavorable
  3. $90,000 Favorable
  4. $90,000 Unfavorable

Correct Answer: $10,000 Favorable

Solution: 

Cost Variance = Actual Cost - Budgeted Cost = $90,000 - $100,000 = $10,000 Favorable.

If a company has a budgeted cost of $100,000 and an actual cost of $90,000, what

Practice Questions

Q1
If a company has a budgeted cost of $100,000 and an actual cost of $90,000, what is the cost variance?
  1. $10,000 Favorable
  2. $10,000 Unfavorable
  3. $90,000 Favorable
  4. $90,000 Unfavorable

Questions & Step-by-Step Solutions

If a company has a budgeted cost of $100,000 and an actual cost of $90,000, what is the cost variance?
  • Step 1: Identify the budgeted cost, which is $100,000.
  • Step 2: Identify the actual cost, which is $90,000.
  • Step 3: Use the formula for cost variance: Cost Variance = Actual Cost - Budgeted Cost.
  • Step 4: Substitute the values into the formula: Cost Variance = $90,000 - $100,000.
  • Step 5: Calculate the result: $90,000 - $100,000 = -$10,000.
  • Step 6: Since the result is negative, it indicates a favorable variance, so we say it is $10,000 Favorable.
  • Cost Variance – Cost variance is the difference between the actual cost incurred and the budgeted cost, indicating whether the project is under or over budget.
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