Question

In a recent year, BMW sold 216,944 of its 1 Series cars. Assume the company expected to sell 225,944 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. Compute the sales price variance and the sales volume variance.

Answer 1

Answer:

Sales price variance = $43,388,800 Favorable

Sales volume variance =  -$270,000,000 Unfavorable

Explanation:

Actual sales price per unit = $30,200

Budgeted sales price per unit = $30,000

Actual quantity sold = 216,944

Budgeted quantity to sell = Expected quantity to sell 225,944

Therefore, we have:

Sales price variance = (Actual sales price per unit - Budgeted sales price per unit) * Actual quantity sold = ($30,200 - $30,000) * 216,944 = $43,388,800 Favorable

Sales price variance is favorable because actual sales price per unit is greater than budgeted sales price per unit.

Sales volume variance = (Actual quantity sold - Budgeted quantity to sell) * Budgeted sales price per unit = (216,944 - 225,944) * $30,000 =  -$270,000,000 Unfavorable

Sales volume variance is unfavorable because actual quantity sold is less than budgeted quantity to sell.