A company has a budgeted variable cost of $3 per unit for 10,000 units. If the actual variable cost is $4 per unit for 12,000 units, what is the total variable cost variance?
Practice Questions
1 question
Q1
A company has a budgeted variable cost of $3 per unit for 10,000 units. If the actual variable cost is $4 per unit for 12,000 units, what is the total variable cost variance?
Q: A company has a budgeted variable cost of $3 per unit for 10,000 units. If the actual variable cost is $4 per unit for 12,000 units, what is the total variable cost variance?
Step 1: Identify the budgeted variable cost per unit, which is $3.
Step 2: Identify the budgeted number of units, which is 10,000.
Step 3: Calculate the budgeted total variable cost by multiplying the budgeted cost per unit by the budgeted number of units: $3 * 10,000 = $30,000.
Step 4: Identify the actual variable cost per unit, which is $4.
Step 5: Identify the actual number of units produced, which is 12,000.
Step 6: Calculate the actual total variable cost by multiplying the actual cost per unit by the actual number of units: $4 * 12,000 = $48,000.
Step 7: Calculate the total variable cost variance by subtracting the budgeted total variable cost from the actual total variable cost: $48,000 - $30,000 = $18,000.
Step 8: Determine if the variance is favorable or unfavorable. Since the actual cost is higher than the budgeted cost, the variance is unfavorable.
