In a case study, a company has a budgeted cost of goods sold of $40,000 and actual cost of goods sold of $45,000. What is the cost variance?
Practice Questions
1 question
Q1
In a case study, a company has a budgeted cost of goods sold of $40,000 and actual cost of goods sold of $45,000. What is the cost variance?
$5,000 Favorable
$5,000 Unfavorable
$0
$10,000 Unfavorable
The cost variance is calculated as Actual Cost of Goods Sold ($45,000) minus Budgeted Cost of Goods Sold ($40,000), resulting in a $5,000 unfavorable variance.
Questions & Step-by-step Solutions
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Q
Q: In a case study, a company has a budgeted cost of goods sold of $40,000 and actual cost of goods sold of $45,000. What is the cost variance?
Solution: The cost variance is calculated as Actual Cost of Goods Sold ($45,000) minus Budgeted Cost of Goods Sold ($40,000), resulting in a $5,000 unfavorable variance.
Steps: 5
Step 1: Identify the budgeted cost of goods sold, which is $40,000.
Step 2: Identify the actual cost of goods sold, which is $45,000.
Step 3: Subtract the budgeted cost from the actual cost: $45,000 - $40,000.
Step 4: Calculate the result, which is $5,000.
Step 5: Determine if the variance is favorable or unfavorable. Since the actual cost is higher than the budgeted cost, it is an unfavorable variance.
