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A company budgeted $200,000 for direct materials but actually spent $220,000. Wh

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Question: A company budgeted $200,000 for direct materials but actually spent $220,000. What is the direct materials variance?

Options:

  1. $20,000 Favorable
  2. $20,000 Unfavorable
  3. $40,000 Favorable
  4. $40,000 Unfavorable

Correct Answer: $20,000 Unfavorable

Solution: 

Direct materials variance = Actual Cost - Budgeted Cost = $220,000 - $200,000 = $20,000 Unfavorable.

A company budgeted $200,000 for direct materials but actually spent $220,000. Wh

Practice Questions

Q1
A company budgeted $200,000 for direct materials but actually spent $220,000. What is the direct materials variance?
  1. $20,000 Favorable
  2. $20,000 Unfavorable
  3. $40,000 Favorable
  4. $40,000 Unfavorable

Questions & Step-by-Step Solutions

A company budgeted $200,000 for direct materials but actually spent $220,000. What is the direct materials variance?
  • Step 1: Identify the budgeted cost for direct materials, which is $200,000.
  • Step 2: Identify the actual cost spent on direct materials, which is $220,000.
  • Step 3: Calculate the direct materials variance by subtracting the budgeted cost from the actual cost: $220,000 - $200,000.
  • Step 4: Determine the result of the calculation, which is $20,000.
  • Step 5: Since the actual cost is higher than the budgeted cost, label the variance as 'Unfavorable'.
  • Direct Materials Variance – The difference between the actual cost of direct materials and the budgeted cost, indicating whether the company spent more or less than planned.
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