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If a company has a budgeted profit of $50,000 and actual profit of $45,000, what

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Question: If a company has a budgeted profit of $50,000 and actual profit of $45,000, what is the profit variance?

Options:

  1. $5,000 Favorable
  2. $5,000 Unfavorable
  3. $10,000 Favorable
  4. $10,000 Unfavorable

Correct Answer: $5,000 Unfavorable

Solution: 

Profit Variance = Actual Profit - Budgeted Profit = $45,000 - $50,000 = -$5,000, which is Unfavorable.

If a company has a budgeted profit of $50,000 and actual profit of $45,000, what

Practice Questions

Q1
If a company has a budgeted profit of $50,000 and actual profit of $45,000, what is the profit variance?
  1. $5,000 Favorable
  2. $5,000 Unfavorable
  3. $10,000 Favorable
  4. $10,000 Unfavorable

Questions & Step-by-Step Solutions

If a company has a budgeted profit of $50,000 and actual profit of $45,000, what is the profit variance?
  • Step 1: Identify the budgeted profit, which is $50,000.
  • Step 2: Identify the actual profit, which is $45,000.
  • Step 3: Calculate the profit variance by subtracting the budgeted profit from the actual profit: $45,000 - $50,000.
  • Step 4: The result of the calculation is -$5,000.
  • Step 5: Since the result is negative, it means the profit variance is unfavorable.
  • Profit Variance – The difference between actual profit and budgeted profit, indicating performance against financial expectations.
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