Answer (B) is correct . The $144,000 annual amount equals $12,000 per month. Since volume is expected to be 5,000 units per month, and the $12,000 is considered a variable cost, budgeted cost per unit is $2.40 ($12,000 ¡Â 5,000 units). If 4,500 units are produced, the total variable costs should be $10,800 (4,500 units ¡Á $2.40). Subtracting the $10,100 of actual costs from the budgeted figure results in a favorable variance of $700.Answer (A) is incorrect because The amount of $1,900 is calculated using 5,000 units produced instead of the actual 4,500.
Answer (C) is incorrect because The $144,000 annual amount equals $12,000 per month. Since volume is expected to be 5,000 units per month, and the $12,000 is considered a variable cost, budgeted cost per unit is $2.40 ($12,000 ¡Â 5,000 units). If 4,500 units are produced, the total variable costs should be $10,800 (4,500 units ¡Á $2.40). Subtracting the $10,100 of actual costs from the budgeted figure results in a favorable variance of $700.
Answer (D) is incorrect because The $700 variance is favorable. |
