Question

Danner Fashions sells a line of women's dresses. Danner's performance report for November is shown below: (CMA adapted)

The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income.

	Actual					Budget
Dresses sold		6,200					7,440
Sales	$	365,800				$	550,560
Variable costs		(179,800	)				(223,200	)
Contribution margin	$	186,000					327,360
Fixed Costs		(120,000	)				(104,000	)
Operating income	$	66,000				$	223,360

The sales price variance for November is?

Answer 1

Sales Price variance for November	=	$                               93,000	Unfavorable
Workings:
Flexible budget for Sales	=	($550560 / 7440) * 6200
	=	$                           4,58,800
Flexible Budget Sales variance	=	$365800 - $458800
	=	$                               93,000	Unfavorable