21. A company produced 5,000 units and expected total material costs to be $25,000. However, actual material costs were $27,520. What is the material cost variance per unit?
Answer: C
$0.50 unfavorable
The material cost variance per unit is calculated by determining the difference between the actual total material costs and the expected total material costs, divided by the number of units produced. In this case, the unfavorable variance is $27,520 - $25,000 = $2,520, and when divided by 5,000 units, the variance per unit is $0.50.
A) $2.00 unfavorable
This option suggests a variance of $2.00 per unit, which would imply a total unfavorable variance of $10,000 (5,000 units x $2.00). However, since the actual material costs were only $27,520, this option is incorrect as it significantly overstates the variance.
B) $1.00 unfavorable
A $1.00 unfavorable variance per unit would indicate a total unfavorable variance of $5,000 (5,000 units x $1.00). Given the actual material costs of $27,520, this option misrepresents the variance, as the total variance is only $2,520.
C) $0.50 unfavorable
This option correctly identifies the material cost variance as $0.50 per unit. The total unfavorable variance calculated as $27,520 (actual) - $25,000 (expected) equals $2,520. Dividing this by the 5,000 units produced gives a variance of $0.50 per unit, confirming this option as correct.
D) $1.50 unfavorable
This option implies a variance of $1.50 per unit, which would result in a total unfavorable variance of $7,500 (5,000 units x $1.50). This amount exceeds the actual unfavorable variance of $2,520, making this option incorrect.
Conclusion
The correct answer of $0.50 unfavorable accurately reflects the material cost variance calculated based on actual versus expected costs. All other options either overstate or miscalculate the variance, failing to align with the given data. Thus, option C is definitively the right choice.