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

\[

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

\]

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

\[

$$\begin{aligned} &\text{Sales Volume Variance} = \text{Flexible Budget} - \text{Fixed Budget} \\ &\text{Sales Volume Variance} = \$462,000 - \$500,500 = -\$38,500 \quad (\text{Unfavorable}) \end{aligned}$$

\]
</reasoning>

<answer>

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

<br>

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

</answer>

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Answer:

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<reasoning>

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

\[

$$\begin{aligned} &\text{Sales Volume Variance} = \text{Flexible Budget} - \text{Fixed Budget} \\ &\text{Sales Volume Variance} = \$462,000 - \$500,500 = -\$38,500 \quad (\text{Unfavorable}) \end{aligned}$$

\]
</reasoning>

<answer>

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

<br>

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

</answer>

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