Question

A company has budgeted variable costs of $1,500,000 and actual variable costs of $1,425,000. This results in an unfavorable variance of:

Options:
A. $75,000
B. $150,000
C. $25,000
D. $50,000

Answer 1

The calculated variance between budgeted variable costs of $1,500,000 and actual costs of $1,425,000 is $75,000, which is a favorable variance, not unfavorable. The correct answer is Option A.

Step-by-step explanation:

The question relates to the concept of budget variance, particularly a variable cost variance. When a company has budgeted variable costs of $1,500,000 and actual costs come to $1,425,000, the actual costs are less than the budgeted costs.

This means the company spent less than anticipated, resulting in a favorable variance, not an unfavorable one. The variance can be calculated by subtracting the actual costs from the budgeted costs: $1,500,000 - $1,425,000 = $75,000.

Therefore, the correct answer is Option A, $75,000.