A company planned to produce 10,000 units at a cost of $5 per unit. If the actual cost was $6 per unit, what is the total cost variance?

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Q: A company planned to produce 10,000 units at a cost of $5 per unit. If the actual cost was $6 per unit, what is the total cost variance?

Solution: Total Cost Variance = (Actual Cost - Budgeted Cost) * Actual Units = ($6 - $5) * 10,000 = $10,000 (Unfavorable)

Steps: 6

Step 1: Identify the budgeted cost per unit, which is $5.
Step 2: Identify the actual cost per unit, which is $6.
Step 3: Calculate the difference between the actual cost and the budgeted cost: $6 - $5 = $1.
Step 4: Identify the number of units planned to be produced, which is 10,000 units.
Step 5: Multiply the difference from Step 3 by the number of units from Step 4: $1 * 10,000 = $10,000.
Step 6: Determine if the variance is favorable or unfavorable. Since the actual cost is higher than the budgeted cost, it is unfavorable.