JT Engineering has determined that it should cost $14,000 indirect materials, $12,600 indirect labor, and $6,200 in total overhead to produce 1,000 widgets. During the most recent period, JT actually spent $13,860 indirect materials, $12,420 indirect labor, and $6,500 in total overhead to produce 1,000 widgets. What is JT's total variance? Is it favorable or unfavorable?

Question

Nicolas Bryant

Mathematics

14 June, 17:46

JT Engineering has determined that it should cost $14,000 indirect materials, $12,600 indirect labor, and $6,200 in total overhead to produce 1,000 widgets. During the most recent period, JT actually spent $13,860 indirect materials, $12,420 indirect labor, and $6,500 in total overhead to produce 1,000 widgets. What is JT's total variance? Is it favorable or unfavorable?

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Answers (1)

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Tori Gilbert · Answer 1

total variance: - $20 favorable

Step-by-step explanation:

The estimated cost is ...

$14000 + 12600 + 6200 = $32800

The actual cost is ...

$13860 + 12420 + 6500 = $32780

The variance is the difference between actual cost and predicted cost:

$32,780 - 32800 = - $20.

It is favorable when actual costs are lower than predicted.