Question

In a recent year, BMW sold 182,158 of its 1 Series cars. Assume the company expected to sell 191,158 of these cars during the year. Also assume the budgeted sales price for each car was $30,000, and the actual sales price for each car was $30,200.1. Compute the sales price variance and the sales volume variance.

Answer 1

Answer:

Price Variance = $36,431,600 Favorable

Volume Variance = $270,000,000 Unfavorable

Explanation:

We can compute the variances as follows,

Price variance = (Actual price - Budgeted price ) * Actual volume of Cars

Price variance = (30,200 - 30,000) * 182,158

Price Variance = $36,431,600 Favorable.

The variance is favorable as we got a better price than we budgeted.

Sales Volume Variance = (Actual Volume - Budgeted Volume)*Budgeted Price

Volume Variance = (182,158 - 191,158) * 30,000

Volume Variance = $270,000,000 Unfavorable

Since the actual cars sold is less than budgeted, the variance is negative.

Hope that helps.