Question

Pricing Strategy, Sales Variances

Eastman, Inc., manufactures and sells three products: R, S, and T. In January, Eastman, Inc., budgeted sales of the following.

	Budgeted Volume	Budgeted Price
Product R	113,200	$27
Product S	154,500	22
Product T	21,500	21

At the end of the year, actual sales revenue for Product R and Product S was $3,018,600 and $3,314,000, respectively. The actual price charged for Product R was $26 and for Product S was $20. Only $10 was charged for Product T to encourage more consumers to buy it, and actual sales revenue equaled $558,500 for this product.

Required:

1. Calculate the sales price and sales volume variances for each of the three products based on the original budget.

	Sales price variance		Sales volume variance
Product R	$		$
Product S	$		$
Product T	$		$

2. Suppose that Product T is a new product just introduced during the year. What pricing strategy is Eastman, Inc., following for this product?

Answer 1