If a company has a budgeted production cost of $150,000 and actual production co

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Question: If a company has a budgeted production cost of $150,000 and actual production cost of $180,000, what is the cost variance?

Options:

Correct Answer: $30,000 Unfavorable

Solution:

Cost Variance = Actual Cost - Budgeted Cost = $180,000 - $150,000 = $30,000 Unfavorable.

If a company has a budgeted production cost of $150,000 and actual production cost of $180,000, what is the cost variance?

If a company has a budgeted production cost of $150,000 and actual production cost of $180,000, what is the cost variance?

Step 1: Identify the budgeted production cost, which is $150,000.
Step 2: Identify the actual production cost, which is $180,000.
Step 3: Use the formula for cost variance: Cost Variance = Actual Cost - Budgeted Cost.
Step 4: Substitute the values into the formula: Cost Variance = $180,000 - $150,000.
Step 5: Calculate the difference: $180,000 - $150,000 = $30,000.
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 – Cost variance measures the difference between actual costs and budgeted costs, indicating whether a company is over or under budget.