Question

exercise 21-26 (algo) computing sales variances lo a1

mia wiz sells computers. during may, it sold 600 computers at a $800 per unit price. the fixed budget for may predicted sales of 650 computers at an per unit price of $770.

aq = actual quantity
sq = standard quantity
ap = actual price
sp = standard price

1&2. compute the sales price variance and the sales volume variance for may. identify it as favorable or unfavorable. note: indicate the effect of each variance by selecting favorable, unfavorable, or no variance.

Explanation:

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<reasoning>

Calculate Actual Sales, Flexible Budget, and Fixed Budget values

\[

$$\begin{aligned} &\text{Actual Sales Quantity (AQ)} = 600 \\ &\text{Actual Price (AP)} = \$800 \\ &\text{Actual Sales Revenue} = 600 \times \$800 = \$480,000 \\ &\text{Standard Price (SP)} = \$770 \\ &\text{Flexible Budget Sales Revenue} = \text{AQ} \times \text{SP} = 600 \times \$770 = \$462,000 \\ &\text{Standard Quantity (SQ)} = 650 \\ &\text{Fixed Budget Sales Revenue} = \text{SQ} \times \text{SP} = 650 \times \$770 = \$500,500 \end{aligned}$$

\]

Compute Sales Price Variance

\[

$$\begin{aligned} &\text{Sales Price Variance} = (\text{AP} - \text{SP}) \times \text{AQ} \\ &\text{Sales Price Variance} = (\$800 - \$770) \times 600 = \$30 \times 600 = \$18,000 \\ &\text{Since AP } (\$800) > \text{SP } (\$770)\text{, the variance is Favorable (F).} \end{aligned}$$

\]

Compute Sales Volume Variance

\[

$$\begin{aligned} &\text{Sales Volume Variance} = (\text{AQ} - \text{SQ}) \times \text{SP} \\ &\text{Sales Volume Variance} = (600 - 650) \times \$770 = -50 \times \$770 = -\$38,500 \\ &\text{Since AQ } (600) < \text{SQ } (650)\text{, the variance is Unfavorable (U).} \end{aligned}$$

\]
</reasoning>

<answer>

1. Budget Table Calculations

Budget Category	Quantity	Unit Price	Total Revenue
Flexible Budget	600	\$770	\$462,000
Fixed Budget	650	\$770	\$500,500

---

2. Sales Variances

Variance Type	Amount	Type
Sales Volume Variance	\$38,500	Unfavorable

</answer>

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Answer:

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Calculate Actual Sales, Flexible Budget, and Fixed Budget values

\[

$$\begin{aligned} &\text{Actual Sales Quantity (AQ)} = 600 \\ &\text{Actual Price (AP)} = \$800 \\ &\text{Actual Sales Revenue} = 600 \times \$800 = \$480,000 \\ &\text{Standard Price (SP)} = \$770 \\ &\text{Flexible Budget Sales Revenue} = \text{AQ} \times \text{SP} = 600 \times \$770 = \$462,000 \\ &\text{Standard Quantity (SQ)} = 650 \\ &\text{Fixed Budget Sales Revenue} = \text{SQ} \times \text{SP} = 650 \times \$770 = \$500,500 \end{aligned}$$

\]

Compute Sales Price Variance

\[

$$\begin{aligned} &\text{Sales Price Variance} = (\text{AP} - \text{SP}) \times \text{AQ} \\ &\text{Sales Price Variance} = (\$800 - \$770) \times 600 = \$30 \times 600 = \$18,000 \\ &\text{Since AP } (\$800) > \text{SP } (\$770)\text{, the variance is Favorable (F).} \end{aligned}$$

\]

Compute Sales Volume Variance

\[

$$\begin{aligned} &\text{Sales Volume Variance} = (\text{AQ} - \text{SQ}) \times \text{SP} \\ &\text{Sales Volume Variance} = (600 - 650) \times \$770 = -50 \times \$770 = -\$38,500 \\ &\text{Since AQ } (600) < \text{SQ } (650)\text{, the variance is Unfavorable (U).} \end{aligned}$$

\]
</reasoning>

<answer>

1. Budget Table Calculations

Budget Category	Quantity	Unit Price	Total Revenue
Flexible Budget	600	\$770	\$462,000
Fixed Budget	650	\$770	\$500,500

---

2. Sales Variances

Variance Type	Amount	Type
Sales Volume Variance	\$38,500	Unfavorable

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