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A company has a budgeted direct material cost of $30,000 but incurs $32,000. Wha

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Question: A company has a budgeted direct material cost of $30,000 but incurs $32,000. What is the direct material variance?

Options:

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

Correct Answer: $2,000 Unfavorable

Solution: 

Direct Material Variance = Actual Cost - Budgeted Cost = $32,000 - $30,000 = $2,000 Unfavorable.

A company has a budgeted direct material cost of $30,000 but incurs $32,000. Wha

Practice Questions

Q1
A company has a budgeted direct material cost of $30,000 but incurs $32,000. What is the direct material variance?
  1. $2,000 Favorable
  2. $2,000 Unfavorable
  3. $1,000 Favorable
  4. $1,000 Unfavorable

Questions & Step-by-Step Solutions

A company has a budgeted direct material cost of $30,000 but incurs $32,000. What is the direct material variance?
  • Step 1: Identify the budgeted direct material cost, which is $30,000.
  • Step 2: Identify the actual direct material cost incurred, which is $32,000.
  • Step 3: Calculate the direct material variance by subtracting the budgeted cost from the actual cost: $32,000 - $30,000.
  • Step 4: Determine the result of the calculation, which is $2,000.
  • Step 5: Since the actual cost is higher than the budgeted cost, label the variance as 'Unfavorable'.
  • Direct Material Variance – The difference between the actual cost of direct materials incurred and the budgeted cost, indicating whether the company spent more or less than planned.
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