Comp Wiz sells computers. During May 2015, it sold 600 computers at a $900 average price each. The May 2015 fixed budget included sales of 650 computers at an average price of $880 each.
Compute the sales price variance and the sales volume variance for May 2015.
Variance is the result of comparison between actual and standard amounts. Examples are rate and quantity variances which could be favorable and unfavorable.
Answer and Explanation:
Sales price variance is computed as follows:
Sales price variance = (Budgeted price - Actual price) * Actual units sold
Sales price variance = ($880 - $900) * 600 units
Sales price variance = $12,000 favorable
Sales volume variance is computed as follows:
Sales volume variance = (Budgeted units - Actual units) * Budgeted price
Sales volume variance = (650 - 600) * $880
Sales volume variance = $44,000 unfavorable
Because we're computing for variances related to sales, higher units and selling price compared to budget would be favorable.
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from Business Management: Help & ReviewChapter 9 / Lesson 16