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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?

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Answer:

$600 unfavorable

Explanation:

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

[tex]B = 14,000*5.50 + 19,400\\B= \$96,400[/tex]

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

[tex]V= \$96,400 - \$97,000\\V= -\$600[/tex]

Since the variance is negative, the variance is unfavorable

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