Green Company planned to produce 12,000 units.Processing required 16,000 machine hours at a cost of $15,000 + $10.50 per machine hour.Actual sales were 14,000 units requiring 20,000 machine hours.Actual processing cost was $222,000._____ is the static-budget variance for processing.
A)$39,000 favorable
B)$39,000 unfavorable
C)$42,000 favorable
D)$42,000 unfavorable

Question

Quizplus · Accepted Answer

The static budget for processing cost is: 16,000 machine hours x $10.5 per machine hour + $15,000 = $183,000 
The actual processing cost is given as $222,000 
Thus, the static-budget variance for processing is: 
Actual processing cost - Budgeted processing cost = $222,000 - $183,000 = $39,000 unfavorable. 
Therefore, the correct answer is B.

Green Company Planned to Produce 12,000 Units