Question

EB17.

LO 7.5The production cost for UV protective sunglasses is $5.50 per unit and fixed costs are $19,400 per month. How much is the favorable or unfavorable variance if 14,000 units were produced for a total of $97,000?

Answer 1

$600 unfavorable

Step-by-step explanation:

The budgeted cost of producing 14,000 units at $5.50 per unit and with fixed costs of $19,400 is:

`B = 14,000*5.50 + 19,400\\B= \$96,400`

The variance is given by subtracting the budgeted cost by the actual cost ($97,000):

`V= \$96,400 - \$97,000\\V= -\$600`

Since the variance is negative, the variance is unfavorable