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.

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.

Accepted Answer

{ "quality": "clear", "question_count": 1, "skills_matched": [ "step_cot", "explain_then_answer", "quick" ], "needs_drawing": false, "concepts_used": [ "Sales Price Variance", "Sales Volume Variance" ], "new_concepts": [], "current_concepts": [ "Sales Price Variance", "Sales Volume Variance" ] } ## 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 $$ \begin{aligned} &\text{Sales Volume Variance} = (\text{AQ} - \text{SQ}) \times \text{SP} \ &\text{Sales Volume Variance} = (600 - 650) \times \$770 = -50 \times \$770 = -\$38,500 \ &\text{Since AQ } (600) < \text{SQ } (650)\text{, the variance is Unfavorable (U).} \end{aligned} $$ ### 1. Budget Table Calculations | Budget Category | Quantity | Unit Price | Total Revenue | | :--- | :---: | :---: | :---: | | **Actual Sales** | 600 | \$800 | \$480,000 | | **Flexible Budget** | 600 | \$770 | \$462,000 | | **Fixed Budget** | 650 | \$770 | \$500,500 | --- ### 2. Sales Variances | Variance Type | Amount | Type | | :--- | :---: | :---: | | **Sales Price Variance** | \$18,000 | Favorable | | **Sales Volume Variance** | \$38,500 | Unfavorable | { "subject": "Business", "question_type": "Fill-in-the-blank", "knowledge_point": [ "Business", "Accounting", "Sales Variance Analysis" ] }

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QUESTION IMAGE

Question

Explanation:

Calculate Actual Sales, Flexible Budget, and Fixed Budget values

Compute Sales Price Variance

Compute Sales Volume Variance

Answer:

1. Budget Table Calculations

2. Sales Variances

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