Question

Julie is a manager at Trico Inc. Julie is working on a performance report: Actual Budgeted...

Julie is a manager at Trico Inc.

Julie is working on a performance report:

Actual Budgeted Variance Variance percentage

Sales $220,000 $250,000

COGS $140,000 $180,000

What variance percentage for COGS?

22.2% U

28.6% U

28.6% F

22.2%F

Business   Accounting   
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Answer #1

Ans. Option 4th 22.2% F

Working notes:

*Calculation of variance in amount of cost of goods sold:

Variance in amount = Budgeted cost of goods sold - Actual cost of goods sold

= $180,000 - $140,000

= $40,000 favorable

*Calculation of variance in percentage:

Variance in percentage = Variance in amount / Budgeted cost of goods sold

= $40,000 / $180,000

= 0.222 or 22.2% favorable

*Decrease in costs from budget to actual = Favorable variance

*Increase in costs from budget to actual = Unfavorable variance

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