Question

EA17.

LO 7.5The production cost for a waterproof phone case is $7 per unit and fixed costs are $23,000 per month. How much is the favorable or unfavorable variance if 5,500 units were produced for a total of $61,000?

Answer 1

The favorable variance for the production of 5,500 waterproof phone cases, given the actual cost of $61,000, is $500. This is determined by comparing the actual cost to the budgeted cost, which includes the standard cost per unit, number of units produced, and fixed costs.

Step-by-step explanation:

To calculate the favorable or unfavorable variance when producing waterproof phone cases, we need to compare the actual cost to the budgeted cost. The budgeted cost is based on the standard cost per unit and the number of units produced, plus fixed costs.

The standard cost per unit is $7, and the company produced 5,500 units. Therefore, the total variable cost is 7 * 5,500 = $38,500. Adding the fixed costs of $23,000, the total budgeted cost is $38,500 + $23,000 = $61,500.

The actual cost is given as $61,000. To find the variance, subtract this from the budgeted cost:

Budgeted Cost - Actual Cost
$61,500 - $61,000 = $500

A positive result signifies a favorable variance, meaning the actual costs were less than the budgeted amount. Since we have a positive $500, this means the variance is favorable.

Answer 2

$500 (Favorable)

Step-by-step explanation:

Given that,

Production cost = $7 per unit

Fixed costs = $23,000 per month

Units produced = 5,500

Actual total costs = $61,000

Standard cost = Fixed cost + Variable cost

= $23,000 + ($7 × 5,500)

= $23,000 + $38,500

= $61,500

Variance = Standard cost - Actual total costs

= $61,500 - $61,000

= $500 (Favorable)