A company had the following direct materials cost information: Standard costs assigned: Direct materials standard cost (405,000 units @ $2/unit) $810,000 Actual costs: Direct Materials costs incurred (403,750 units @ $2.20/unit) $888,250 What was the cost variance? a) $2,500 Favorable. b) $78,250 Favorable c) $78.250 Unfavorable d) $80,750 Favorable. e) $80,750 Unfavorable.
Accepted Solution
A:
Answer:Option c) $78,250 unfavorableStep-by-step explanation:The given information in the question :Standard cost = $810,000Actual cost = $888,250Cost variance can be calculated as using the following formula :Cost variance = standard cost - actual cost = 810,000 - 888,250 = ($78,250) unfavorableFavorable indicates how much under budget the project.unfavorable indicates how much over budget the project.Therefore, Option c) 78,250 unfavorable is the answer.