A company planned to produce 10,000 units at a cost of $5 per unit. If the actua

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Question: 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?

Options:

$10,000 Favorable
$10,000 Unfavorable
$5,000 Favorable
$5,000 Unfavorable

Correct Answer: $10,000 Unfavorable

Solution:

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

A company planned to produce 10,000 units at a cost of $5 per unit. If the actua

Practice Questions

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?

$10,000 Favorable
$10,000 Unfavorable
$5,000 Favorable
$5,000 Unfavorable

Questions & Step-by-Step Solutions

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?

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.

Cost Variance – The difference between actual costs and budgeted costs, calculated to assess financial performance.
Budgeted vs Actual Costs – Understanding the distinction between planned costs and the costs incurred during production.
Units Produced – The total number of units for which costs are being calculated, impacting the total cost variance.

A company planned to produce 10,000 units at a cost of $5 per unit. If the actua

What’s inside this PDF?

A company planned to produce 10,000 units at a cost of $5 per unit. If the actua

Practice Questions

Questions & Step-by-Step Solutions

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