Question

Rundle Educational Services had budgeted its training service charge at $84 per hour. The company planned...

Rundle Educational Services had budgeted its training service charge at $84 per hour. The company planned to provide 26,000 hours of training services during Year 3. By lowering the service charge to $71 per hour, the company was able to increase the actual number of hours to 27,900.

Required

  1. Determine the sales volume variance, and indicate whether it is favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)

  2. Determine the flexible budget variance, and indicate whether it is favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)

  3. Did lowering the price of training services increase revenue?

a.Volume variance.

b. Flexible budget variance.

c. Was the decision profitable?

Business   Accounting   
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Homework Answers

Answer #1
a. Sales volume variance=Budgeted price*(Budgeted sales volume-Actual sales volume)
If the answer is negative, variance is favorable.Otherwise unfavorable
Sales volume variance=84*(26000-27900)=84*-1900=-159600=$ 159600 F
b. Flexible budget variance=(Budgeted price-Actual price)*Actual sales volume
If the answer is negative, variance is favorable.Otherwise unfavorable
Flexible budget variance=(84-71)*27900=362700=$ 362700 U
c. No.
Budgeted sales revenue=26000*84=$ 2184000
Actual sales revenue=27900*71=$ 1980900
Decrease in sales revenue=2184000-1980900=$ 203100
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