Question

# Davidson Corp. produces a single product: fireproof safety deposit boxes for home use. The budget going...

Davidson Corp. produces a single product: fireproof safety deposit boxes for home use. The budget going into the current year anticipated a selling price of \$58 per unit. Because of competitive pressures, the company had to cut selling prices by 5% during the year. Budgeted variable costs per unit are \$35, and budgeted total fixed costs are \$157,500 for the year. Anticipated sales volume for the year was 11,500 units. Actual sales volume was 10% less than budget.

(1) What was the sales price variance for the year? (2) Label this variance F (favorable) or U (unfavorable), as appropriate.

Step 1: Calculation of actual price

Anticipated or Standard Price = \$58 per unit

Actual Price = \$58 - (\$58 * 5%)

 Actual Price = \$58 - \$2.90 = \$55.10 per unit

Step 2: Calculation of Actual Unit

Anticipated or Standard sales Units = 11500 units

Actual Units = 11500 units - (11500 * 10%)

 Actual Units = 11500 - 1150 = 10350 units

Step 3: Calculation of Sales price Variance

 Sales Price Variance = (Actual Price - Standard Price) * Actual Unit

Sales Price Variance = (\$55.10 - \$58.00) * 10350 units

 Sales Price Variance = (\$2.90) * 10350 units = (\$30015) Unfavorable

All the best...

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