Question

# Pricing Strategy, Sales Variances Eastman, Inc., manufactures and sells three products: R, S, and T. In...

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 Budgeted Volume 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*(28-26) Product S 314400 Unfavorable =157200*(21-19) Product T 465500 Unfavorable =46550*(19-9) Sales volume variance Product R 109200 Favorable =28*(122700-118800) Product S 249900 Favorable =21*(157200-145300) Product T 551950 Favorable =19*(46550-17500) 2 Penetration pricing strategy is being followed which involves charging low prices initially

#### Earn Coins

Coins can be redeemed for fabulous gifts.

##### Need Online Homework Help?

Most questions answered within 1 hours.