A job's original budget is $95,000. Approved change orders add $12,000. Forecast cost is now $101,000. Compared with the adjusted budget, what is the projected variance?
Correct Answer
B) $6,000 favorable.
Adjusted budget is $107,000. Forecast cost of $101,000 is $6,000 below adjusted budget, so the variance is favorable.
Why This Is the Correct Answer
Adjusted budget is $107,000. Forecast cost of $101,000 is $6,000 below adjusted budget, so the variance is favorable.
Why the Other Options Are Wrong
Option A: $6,000 unfavorable.
$6,000 unfavorable has the right amount but the wrong direction: forecast cost is below the adjusted budget. The correct calculation is 95,000 + 12,000 = 107,000; 107,000 - 101,000 = 6,000 favorable.
Option C: $12,000 favorable.
$12,000 favorable reports the change orders, not the variance. The correct calculation is 107,000 - 101,000 = 6,000 favorable.
Option D: $6,000 unfavorable over original.
$6,000 unfavorable over original compares with the $95,000 original budget and ignores the approved change orders. The correct calculation is 107,000 - 101,000 = 6,000 favorable.
Reference Hint
Study anchor (closed-book): memorize Budget variance from CSLB Law and Business Study Guide; CSLB 2026 Law Book / CSLB Law and Business Study Guide Business Finances; know the rule or calculation trigger without relying on exam-room lookup.
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