FastNet Systems is a start-up company that makes connectors for high-speed Internet connections. The company has budgeted variable costs of $ 110 for each connector and fixed costs of $ 4 comma 500 per month. FastNet 's static budget predicted production and sales of 100 connectors in August, but the company actually produced and sold only 74 connectors at a total cost of $ 25 comma 000. FastNet 's flexible budget variance for total costs is

Question

Mclean

Business

7 September, 00:36

FastNet Systems is a start-up company that makes connectors for high-speed Internet connections. The company has budgeted variable costs of $ 110 for each connector and fixed costs of $ 4 comma 500 per month. FastNet 's static budget predicted production and sales of 100 connectors in August, but the company actually produced and sold only 74 connectors at a total cost of $ 25 comma 000. FastNet 's flexible budget variance for total costs is

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Kaylah Booker · Answer 1

Cost variance = $12,360 unfavorable

Explanation:

Giving the following information:

Standard costs:

Budgeted variable costs of $ 110 for each connector

Fixed costs of $4,500 per month.

Actual production = 74 connectors

Total cost = $25,000

First, we need to calculate the standard total cost:

Standard total cost = 4,500 + 110*74 = $12,640

Now, we can determine the flexible budget cost variance:

Cost variance = 12,640 - 25,000 = $12,360 unfavorable