A contractor estimated a job at $120,000 in total cost. Actual costs at completion were: labor $55,000 (estimated $50,000), materials $48,000 (estimated $45,000), and equipment $22,000 (estimated $25,000). What is the total cost variance, and is it favorable or unfavorable?

Explanation

Estimated total = $50,000 + $45,000 + $25,000 = $120,000. Actual total = $55,000 + $48,000 + $22,000 = $125,000. Variance = Actual − Estimated = $125,000 − $120,000 = $5,000 OVER budget, which is unfavorable. Labor and materials overruns more than offset the equipment savings.