ABC Company's performance report for April included the following for direct labor: Budgeted cost = $33,500; Actual cost = $32,200; Variance = $. Use F or U to identify the variance as favorable or unfavorable: .
Question
ABC Company's performance report for April included the following for direct labor: Budgeted cost = 32,200; Variance = $. Use F or U to identify the variance as favorable or unfavorable: .
Solution
To determine whether the variance is favorable (F) or unfavorable (U), we need to compare the actual cost to the budgeted cost.
- The budgeted cost for direct labor is $33,500.
- The actual cost for direct labor is $32,200.
If the actual cost is less than the budgeted cost, the variance is considered favorable because the company spent less than it had planned. If the actual cost is more than the budgeted cost, the variance is considered unfavorable because the company spent more than it had planned.
In this case, the actual cost (33,500).
Therefore, the variance is favorable (F).
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