A drywall cost code for an Orlando project was budgeted at 14,400 sf at $3.20 per sf. Actual cost posted to the code is $49,680. What cost variance should be reported?
Correct Answer
C) $3,600 over budget
The budgeted amount is $46,080. Actual cost is $49,680, so the cost code is $3,600 over budget.
Why This Is the Correct Answer
The budgeted amount is $46,080. Actual cost is $49,680, so the cost code is $3,600 over budget.
Why the Other Options Are Wrong
Option A: $1,920 over budget
$1,920 over budget is below the supported result for job-cost variance; it likely uses the wrong base, period, or account bucket.
Option B: $2,880 under budget
$2,880 under budget is below the supported result for job-cost variance; it likely uses the wrong base, period, or account bucket.
Option D: $4,080 under budget
$4,080 under budget is above the supported result for job-cost variance; it likely adds an unsupported amount or compares the wrong financial base.
Memory Technique
Job-Cost Variance drawer for Accountant Reviewing: label budgeted 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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