Ender Educational Services had budgeted its training service charge at $75 per h
ID: 2380584 • Letter: E
Question
Ender Educational Services had budgeted its training service charge at $75 per hour. The company planned to provide 30,000 hours of training services during 2012. By lowering the service charge to $60 per hour, the company was able to increase the actual number of hours to 31,500.
Determine the sales volume variance, and indicate the effect of the variance by selecting "Favorable", "Unfavorable", or "None" (No effect) (i.e., zero variance). (Input the amount as positive value. Leave no cell blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)
Determine the flexible budget variance, and indicate the effect of the variance by selecting "Favorable", "Unfavorable", or "None" (No effect) (i.e., zero variance). (Input the amount as positive value. Leave no cell blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)
Ender Educational Services had budgeted its training service charge at $75 per hour. The company planned to provide 30,000 hours of training services during 2012. By lowering the service charge to $60 per hour, the company was able to increase the actual number of hours to 31,500.
Explanation / Answer
The sales volume variance is the difference between the actual and expected number of units sold, multiplied by the budgeted price per unit. The formula is:
Sales volume variance =
(Actual units sold - Budgeted units sold) x Budgeted price per unit
therefore,Sales volume variance =(31500-30000)*75
=112500 Favourable
FLEXIBLE BUDGET VARIANCE
BUDGETED TOTAL REVENUE = 75*30000 = 2250000
ACTUAL TOTAL REVENUE = 60*31500 = 1890000
therefore,FLEXIBLE BUDGET VARIANCE = ACTUAL TOTAL REVENUE - BUDGETED TOTAL REVENUE
=1890000 - 2250000
= 360000 UNFAVOURABLE
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