Question

Folsom Fashions sells a line of women's dresses. Folsom's performance report for November is shown below. (CMA adapted)

Answer 1

Answer:

(1) $20,000 U

(2) $15,000 U

Explanation:

(1) Effect of the sales quantity variance on the contribution margin for November:

= (Budget dresses sold - Actual dresses sold) × (Budgeted contribution margin ÷ Budgeted dresses sold)

= (6,000 - 5,000) × (120,000 ÷ 6,000)

= $20,000  unfavorable

(2) Sales price variance for November:

= [(Budgeted sales ÷ Budget dresses sold) - (Actual sales ÷ Actual dresses sold)] × Actual dresses sold

= [(300,000 ÷ 6,000) - (235,000 ÷ 5000)] × 5000

= $15,000  unfavorable