How is a cost variance computed?

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Prepare for the WGU ACCT2350 Intro to Business Accounting Exam. Practice with multiple choice questions and detailed solutions to sharpen your accounting skills. Master your exam with confidence!

Multiple Choice

How is a cost variance computed?

Explanation:
Cost variance measures how much you actually spent compared with what you planned to spend. It is computed as actual cost minus budgeted cost. If the result is positive, you spent more than planned (unfavorable); if negative, you spent less than planned (favorable). The budgeted cost represents the target for the period, while standard cost is a preset cost used in other types of variance analyses, not this particular comparison. For example, if you spent $12,000 but had budgeted $10,000, the cost variance is $2,000 (unfavorable).

Cost variance measures how much you actually spent compared with what you planned to spend. It is computed as actual cost minus budgeted cost. If the result is positive, you spent more than planned (unfavorable); if negative, you spent less than planned (favorable). The budgeted cost represents the target for the period, while standard cost is a preset cost used in other types of variance analyses, not this particular comparison. For example, if you spent $12,000 but had budgeted $10,000, the cost variance is $2,000 (unfavorable).

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