Question

Donn Luxury Resort has just received a utility expense of $45,000. However, the utility expense for Donn was budgeted as $38,700. Calculate the relative variance of the utility expense for Donn by indicating the variance condition (favorable or unfavorable).

Answer 1

Answer:

$6,300( unfavorable)

Explanation:

The relative variance of the utility expense is the budgeted utility expense minus the actual utility expense.

Budgeted utility expense=$38,700

actual utility expense=$45,000

relative variance for utility expense=$38,700-$45,000

relative variance for utility expense=-$6300

Note that this has to do with a cost, hence, the lesser your actual cost is compared to the budgeted cost, the better.

Since actual cost is higher than budgeted, it means more money than expected was spent, all in all, it is an unfavorable variance.