Question

Smith’s Hotel’s banquet department’s annual budgeted sales revenue was based on 45,000 guests at an average check of $10.00. Actual numbers were 47,500 guests at a $9.50 average check. What is volume variance of the sales revenue?

Group of answer choices

$25,000 (F)

$22,500 (U)

$22,500 (F)

$25,000 (U)

Answer 1

Answer -

Volume variance of the sales revenue = $25000 (F)

Calculation:

As per given information,

Budgeted number of guests = 45000

Standard average check = $10

Actual number of guests = 47500

Actual average check = $9.50

Therefore,

Sales volume variance:

= (Actual number of guest * Standard average check) - (Budgeted number of guest * Standard average check)

= (47500 * $10) - (45000 * $10)

= $475000 - $450000

= $25000 Favorable

Sales volume variance is the difference between the actual sales volume and the budgeted sales volume.

Sales volume variance is favorable when the actual sales volume (number of guest) is higher than the budgeted sales volume (number of guest) and unfavorable when the budgeted sales volume (number of guest) is higher than the actual sales volume (number of guest)