Question

Mad Dog Fence company has a Master Budget of $300,000 revenue, which represents 300
fences in unit sales. The variable costs are $450 p/fence. Actuals revenue was $302,500 and
actual number of fences sold were 275. When doing performance reporting, how would you
describe Mad Dog’s revenue variance?

a. unfavorable volume variance, favorable price variance

b. favorable volume variance, unfavorable price variance

c. favorable volume variance, favorable price variance

d. unfavorable volume variance, unfavorable price variance

Answer 1

a. unfavorable volume variance, favorable price variance

Explanation: As there is a Budget of $300,000 revenue, which represents 300 fences in unit sales and Actuals revenue was $302,500 and the actual number of fences sold was 275, we can see total no of units sales actual is less than budget so volume variance is unfavorable (calculate volume variance, subtract the budgeted quantity sold from the actual quantity sold) but actual sale price is greater than budget sale price so price variance is favorable.