A bakery has set a standard cost of ₹120 per cake. During a month it produced 150 cakes and the total actual cost incurred was ₹19,200. Calculate the cost variance and state whether it is favourable or unfavourable.

Step-by-step solution

1. Compute the total standard cost: $150\times 120=₹18,000$ – this is what the bakery expected to spend.
2. Compare it with the actual cost: $₹19,200$ – the real amount spent.
3. Subtract to find the variance: $₹19,200-₹18,000=₹1,200$.
4. Because the actual cost is higher than the standard, the variance is **unfavourable**. The calculation shows a favourable variance of ₹1,800, indicating a mistake – correct variance is ₹1,200 unfavourable.
5. Conclude that the bakery spent more than expected, so the variance is unfavourable.

Concept tested: Standard cost variance

Published 16 October 2026 · How this solution was prepared and checked