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  118,800  $28 
Product S  145,300  21 
Product T  17,500  19 
At the end of the year, actual sales revenue for Product R and Product S was $3,190,200 and $2,986,800, respectively. The actual price charged for Product R was $26 and for Product S was $19. Only $9 was charged for Product T to encourage more consumers to buy it, and actual sales revenue equaled $418,950 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  $  Unfavorable  $  Favorable 
Product S  $  Unfavorable  $  Favorable 
Product T  $  Unfavorable  $  Favorable 
2. Suppose that Product T is a new product just introduced during the year. What pricing strategy is Eastman, Inc., following for this product?
Actual sales  
Product R  122700  =3190200/26  
Product S  157200  =2986800/19  
Product T  46550  =418950/9  
1  
Sales price variance  
Product R  245400  Unfavorable  =122700*(2826) 
Product S  314400  Unfavorable  =157200*(2119) 
Product T  465500  Unfavorable  =46550*(199) 
Sales volume variance  
Product R  109200  Favorable  =28*(122700118800) 
Product S  249900  Favorable  =21*(157200145300) 
Product T  551950  Favorable  =19*(4655017500) 
2  
Penetration pricing strategy is being followed which involves charging low prices initially  
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