A company uses a standard absorption costing system and adjusts for any under or over absorbed overheads at the end of each period. The company produces only one type of product. The unit standard costs were the same in both March and April. Data for April included:
Budget Actual
Sales volume 90,000 units 85,000 units
Production volume 80,000 units 78,000 units
Total fixed production overheads $400,000 $395,000
Selling price per unit $11 $14
Variable production costs per unit $4 $4
Determine the sales price variance for April was
Select one:
A. $255,000 favourable
B. $108,000 favourable
C. $170,000 favourable
D. $270,000 favourable
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A company has carried out market research into how many cars it can sell at different prices. If the variable costs per car are $8,000 and total fixed costs are $50,000, from the information below, what is the optimum price?
Options |
Number of Cars |
Selling price ($) |
Option 1 |
100,000 |
10,000 |
Option 2 |
80,000 |
12,000 |
Option 3 |
70,000 |
14,000 |
Option 4 |
50,000 |
16,000 |
Select one:
A. OPTION 3
B. OPTION 2
C. OPTION 1
D. OPTION 4
Determine the sales price variance for April was:
Ans: A) $ 255,000. Favorable
Explanation:
1) ( Actual Price - Standard Price ) × Actual Unit
= ( $ 14 - $ 11) × 85,000 unit
= $ 255,000 Favorable
( Variance is fav. Because actual price greater than standard price.)
what is the optimum price?
Ans:Option ( 3)
Explanation:
1) Optimum price is where a company can earn a maximized profit. It is. We can find the optimum price using trial and error method.
2)
Option 1 | Option 2 | Option 3 | Option 4 | |
Sales per unit | $ 10,000 | 12,000 | 14,000 | 16,000 |
Less: Variable Cost Per Unit | ($8000) | ($8000) | ($8000) | ($8000) |
Contribution Margin Per Unit (a) | $2000 | $4000 | $6000 | $8000 |
Multiply By: No of unit sold( b) | 100,000 | 80,000 | 70,000 | 50,000 |
Total Contribution Margin (a ×b) | $ 200,000,000 | $320,000,000 | $420,000,000 | $400,000,000 |
3) Option 3 has a maximum contribution margin , so $ 14,000 is optimum price.
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