Question 24

The material cost variance per unit is $0.50 unfavorable.

The material cost variance is calculated by comparing the expected total material costs with the actual costs incurred, and then dividing the difference by the number of units produced. In this case, the variance is $27,500 (actual) - $25,000 (expected) = $2,500, which divided by 5,000 units gives a variance of $0.50 unfavorable per unit.

A) $1.50 unfavorable

This option is incorrect because it overestimates the material cost variance per unit. A variance of $1.50 would imply a total variance of $7,500 (5,000 units x $1.50), which is not consistent with the calculated total variance of $2,500.

B) $0.50 unfavorable

This is the correct option as it accurately reflects the material cost variance per unit. The total variance of $2,500, when divided by the 5,000 units produced, results in a variance of $0.50 unfavorable per unit, which aligns perfectly with the calculations performed.

C) $1.00 unfavorable

This option is incorrect because it suggests a total variance of $5,000 (5,000 units x $1.00), which is again inconsistent with the actual total variance of $2,500. Therefore, this option does not accurately represent the material cost variance.

D) $2.00 unfavorable

This option is also incorrect, as it indicates a much larger total variance of $10,000 (5,000 units x $2.00), which significantly exceeds the actual variance of $2,500. This discrepancy shows that $2.00 is not a valid representation of the material cost variance per unit.

Conclusion

The correct answer of $0.50 unfavorable per unit is derived directly from the calculation of total material cost variance divided by the number of units produced. All other options either overestimate or underestimate the actual variance, failing to align with the financial data provided in the question. Thus, option B stands out as the only accurate choice.