Question

Question 1: Sales price variance, sales volume variance, and fixed cost variance

	Budgeted	Actual
Price	$600	$650
Sales volume in units	50	45
Unit VC	$100	$220
Fixed costs	$200,000	$220,000

a) Without computations, characterize the following variances as favorable or unfavorable:
sales price variance F U

sales volume variance F U

fixed cost variance F U


b) Compute the following variances. Enter favorable variances as a positive number and unfavorable variances as a negative number. Do NOT enter F or U after the number.
sales price variance = $
sales volume variance = $
fixed cost variance = $

Answer 1

Answer:

a)

• Sales price variance -------- Favorable
• Sales volume variance------- Unfavorable
• Fixed cost variance ---------- Unfavorable

b)

Calculation of Sales price variance :

Sales price variance

= Actual sales *( Actual price - Budgeted price) = 45 *($ 650 - $ 600) = 45 * $ 50 = $ 2,250

$ 2,250

Calculation of Sales volume variance :

Sales volume variance

= Budgeted price *(Actual sales - Budgeted sales ) = $ 600 * (45 -50) = $ 600 * (-5) = ($ 3,000)

($ 3,000)

Calculation of Fixed cost variance :

Fixed cost variance

= Budgeted fixed cost - Actual fixed cost = $ 2,00,000 - $ 2,20,000 = ($ 20,000)

($ 20,000)