Question

Gridiron Merchandising anticipated selling 30,000 units of a major product and paying sales commissions of $8 per unit. Actual sales and sales commissions totaled 30,500 units and $253,100, respectively. If the company used a flexible budget for performance evaluations, Gridiron would report a cost variance of:
A. $9,100U.

B. $9,100F.

C. $13,100U.

D. $13,100F.

E. None of these.

Answer 1

Answer:

C. $13,100U.

Explanation:

The cost variance is given by the difference between the actual cost of commissions and the projected cost of commissions of 30,000 units at $8 each:

$V = \ 253,100-(\ 8*30,000)\\V=\ 13,100\ U$

Since the actual cost is higher than the anticipated cost, the balance is unfavorable.

Gridiron would report a cost variance of: C. $13,100U.