Given:
Standard production = 16,000 units × 2 pounds = 32,000
Standard material per pound = $2
Actual production = 33,000
Actual material per pound = $1.8
Find:
Materials budget variance = ?
Computation of materials budget variance.
Materials budget variance = Total Actual Amount - Total Standard Amount
Materials budget variance = (33,000 × $1.8) - (32,000 × $2)
Materials budget variance = ($59,400) - ($64,000)
Materials budget variance = $4,600 favorable
Note: It is considered in the interest of the business when the estimated cost is less than the actual cost.
