A masonry cost code was budgeted for 500 units at $14 each. Actual cost is 540 units at $13.50 each. What total cost variance appears?
Correct Answer
D) $290 over budget
Budget cost is $7,000 and actual cost is $7,290, so the code is $290 over budget.
Why This Is the Correct Answer
Budget cost is $7,000 and actual cost is $7,290, so the code is $290 over budget.
Why the Other Options Are Wrong
Option A: $110 under budget
$110 under budget is below the supported result for cost variance; it likely uses the wrong base, period, or account bucket.
Option B: $180 under budget
$180 under budget is below the supported result for cost variance; it likely uses the wrong base, period, or account bucket.
Option C: $190 over budget
$190 over budget is below the supported result for cost variance; it likely uses the wrong base, period, or account bucket.
Memory Technique
Cost Variance drawer for Explaining Material: label dollars before counting dollars.
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section Two, Cost and Expense Records, Objectives of the Cost System and Cost Allocation; use the job ledger figures in the stem and recompute the same accounting measure.
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