A cost code budgeted 2,800 units at $9.50 each. Actual cost is 2,960 units at $9.25 each. What total cost variance appears?
Correct Answer
D) $780 over budget
Budget cost is $26,600 and actual cost is $27,380, so the code is $780 over budget.
Why This Is the Correct Answer
Budget cost is $26,600 and actual cost is $27,380, so the code is $780 over budget.
Why the Other Options Are Wrong
Option A: $240 under budget
$240 under budget is below the supported result for cost variance; it likely uses the wrong base, period, or account bucket.
Option B: $450 over budget
$450 over budget is below the supported result for cost variance; it likely uses the wrong base, period, or account bucket.
Option C: $620 under budget
$620 under budget is below the supported result for cost variance; it likely uses the wrong base, period, or account bucket.
Memory Technique
Dollars and actual live in different drawers; Explains Material tells which opens.
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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