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# A company uses a standard absorption costing system and adjusts for any under or over absorbed...

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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Question text

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.