Winston Co. had two products code named X and Y. The firm had the following budg

Question

Winston Co. had two products code named X and Y. The firm had the following budget for August:

On September 1, the following actual operating results for August were reported:

Total industry volume for both products X and Y was estimated to be 130,000 units at the time of the budget. Actual industry volume for the period for products X and Y was 100,000 units.

The selling price variance for Product Y is:

$90,000 favorable.

$43,200 unfavorable.

$90,000 unfavorable.

$35,000 favorable.

$50,000 unfavorable.

Product X Product Y Total Sales $286,000 520,000 $806,000 Variable Costs   189,800   218,400 408,200 Contribution Margin $96,200 $301,600 $397,800 Fixed Costs     50,000   108,000 158,000 Operating Income $46,200 $193,600 $239,800 Selling Price per unit $110.00 $50.00

Explanation / Answer

Solution :-

Calculation of Selling Price Variance for Product 'Y'

Details for Product 'Y' as given in Question :-

Selling Price :-

Budgeted(Standard)

$50

Actual

540000/90 = $60

Sales Quantity:-

Actual

9000 Units

Formula :-

Selling Price variance = Actual Sales × (Actual Price - Budgeted Price)

OR

Selling Price variance = (Actual Sales units × Actual Price) - (Actual Sales units × Actual Price)

Note: If in the above formula, the outcome is positive then it is a favourable variance and
if answer is negative it is unfavourable.

Now will put the above figures in the formula:-

=             9000 × ( $60 - $50)

=             9000×10

=             90000 $

(Outcome is positive:Favourable)

Solution :-

Calculation of Selling Price Variance for Product 'Y'

Details for Product 'Y' as given in Question :-

Selling Price :-

Budgeted(Standard)

$50

Actual

540000/90 = $60

Sales Quantity:-

Actual

9000 Units

Formula :-

Selling Price variance = Actual Sales × (Actual Price - Budgeted Price)

OR

Selling Price variance = (Actual Sales units × Actual Price) - (Actual Sales units × Actual Price)

Note: If in the above formula, the outcome is positive then it is a favourable variance and
if answer is negative it is unfavourable.

Now will put the above figures in the formula:-

=             9000 × ( $60 - $50)

=             9000×10

=             90000 $

(Outcome is positive:Favourable)

1. So the selling price variance for Product 'Y' is $ 90000 Favourable.

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