Tomorrow Company has the following information available: Budgeted cost of direc
ID: 2522585 • Letter: T
Question
Tomorrow Company has the following information available:
Budgeted cost of direct materials at 900,000 untes $900,000
Budgeted cost of direct materials at 820,000 units $820,000
Actual cost of direct materials at 820,000 unites $840,000
Actual level of output (units) 820,000
Planned level of output (units) 900,000
The cost driver of product costs is units of ouput. What is the static budget variance for direct material costs?
A) $60,000 Favorable B) $60,000 Unfavorable C) $20,000 Unfavorable D) $20,000 Favorable
Explanation / Answer
Answer:C) $20,000 Unfavorable
Direct Material cost variance = (Std. Quantity x Std. Price ) - (Actual Quantity x Actual Price)
Direct Material cost variance = (820000 ) - (840000) = $20000 Unfavourable