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": [ "Flexible Budgeting", "Variance Analysis", "Favorable and Unfavorable Variances" ], "new_concepts": [ "Sales Price Variance", "Sales Volume Variance" ], "current_concepts": [ "Flexible Budgeting", "Variance Analysis", "Favorable and Unfavorable Variances", "Sales Price Variance", "Sales Volume Variance" ] } ## Calculate Actual Sales, Flexible Budget, and Fixed Budget $$ \begin{aligned} &\text{Actual Sales (AQ} \times \text{AP)} = 600 \times \$800 = \$480,000 \ &\text{Flexible Budget (AQ} \times \text{SP)} = 600 \times \$770 = \$462,000 \ &\text{Fixed Budget (SQ} \times \text{SP)} = 650 \times \$770 = \$500,500 \end{aligned} $$ ## Compute Sales Price Variance $$ \begin{aligned} &\text{Sales Price Variance} = \text{Actual Sales} - \text{Flexible Budget} \ &\text{Sales Price Variance} = \$480,000 - \$462,000 = \$18,000 \quad (\text{Favorable}) \end{aligned} $$ ## Compute Sales Volume Variance $$ \begin{aligned} &\text{Sales Volume Variance} = \text{Flexible Budget} - \text{Fixed Budget} \ &\text{Sales Volume Variance} = \$462,000 - \$500,500 = -\$38,500 \quad (\text{Unfavorable}) \end{aligned} $$ | Category | Calculation | Total Amount | | :--- | :--- | :--- | | **Actual Sales** | $600 \text{ units} \times \$800/\text{unit}$ | $\$480,000$ | | **Flexible Budget** | $600 \text{ units} \times \$770/\text{unit}$ | $\$462,000$ | | **Fixed Budget** | $650 \text{ units} \times \$770/\text{unit}$ | $\$500,500$ |
| Variance | 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 Variances" ] }

Category	Calculation	Total Amount
Flexible Budget	\(600 \text{ units} \times \$770/\text{unit}\)	\(\$462,000\)
Fixed Budget	\(650 \text{ units} \times \$770/\text{unit}\)	\(\$500,500\)

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QUESTION IMAGE

Question

Explanation:

Calculate Actual Sales, Flexible Budget, and Fixed Budget

Compute Sales Price Variance

Compute Sales Volume Variance

Answer: