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
Volume		 Budgeted
Price
Product R 114,900        $28       
Product S 148,400        20       
Product T 22,700        20       

At the end of the year, actual sales revenue for Product R and Product S was $3,159,000 and $3,081,800, respectively. The actual price charged for Product R was $27 and for Product S was $19. Only $10 was charged for Product T to encourage more consumers to buy it, and actual sales revenue equaled $599,500 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 $ Unfavorable $ Favorable
Product S $ Unfavorable $ Favorable
Product T $ Unfavorable $ Favorable
Business   Accounting   
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Answer #1

Answer:

Sales Price Variance Sales Volume Variance
Product R 117000 UF 58800 F
Product S 162200 UF 276000 F
Product T 599500 UF 37250 F

Detail working for your easy understanding

Sales Price Variance= (Actual price-Budgeted Price) X Actual Quantity Sold
Product R= (27-28)X 117000=$117000 UF
Actual Quantity Sold= 3159000/27=117000 Unit
Product S= (19-20)X 162200 =$162200 UF
Actual Quantity Sold= 3081800/19=162200 Unit
Product T= (10-20)X 59950 =$599500 UF
Actual Quantity Sold= 599500/10=59950 Unit
Sales Volume Variance=( Actual Sales Quantity- Budgeted Sales Quantity)X Budgeted Price
Product R= ( 117000-114900) X 28=$58800 F
Product S= ( 162200-148400)X20=$276000 F
Product R= ( 59950-22700)X20=$37250 F
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