A Mary Esther cost code was budgeted for 9,600 units at $8.25 per unit. Actual cost posted is $82,440. What cost variance should be reported?
Correct Answer
B) $3,240 unfavorable
Cost variance compares actual cost with the budgeted cost for the same quantity.
Why This Is the Correct Answer
Cost variance compares actual cost with the budgeted cost for the same quantity.
Why the Other Options Are Wrong
Option A: $3,240 favorable
$3,240 favorable is not aligned with the supported result for cost variance; it has the wrong label or classification even if the number looks close.
Option C: $79,200
$79,200 is above the supported result for cost variance; it likely adds an unsupported amount or compares the wrong financial base.
Option D: $72,840
$72,840 is above the supported result for cost variance; it likely adds an unsupported amount or compares the wrong financial base.
Memory Technique
Cost Variance drawer for Accountant Reviews: label compares before counting dollars.
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section Three, Job Cost Accounting, Cost Variance; use the job ledger figures in the stem and recompute the same accounting measure.
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