Question

Duo, Inc., carries two products and has the following year-end income statement (000s omitted): Product AR-10 Product ZR-7 Budget Actual Budget Actual Units 3,600 5,000 9,200 8,600 Sales $ $ 10,800 $ 13,500 $ 18,400 $ 18,060 Variable costs 2,880 5,000 9,200 9,030 Fixed Costs 1,800 1,900 2,400 2,400 Total Costs $ 4,680 $ 6,900 $ 11,600 $ 11,430 Operating income $ 6,120 $ 6,600 $ 6,800 $ 6,630 The net effect of AR-10's sales volume variance on profit is:

Answer 1

Answer:

Sales volume variance $2,380 favorable. The net effect on profit of AR-10's sales is that it will increase profit by $2,380

Explanation:

The sales volume variance is calculated as the difference between the budgeted and the actual sales volume multiplied by he standard profit per unit

Standard profit per unit = 6,120/3,600=$1.7

                                                                    Unit

Budgeted sales units                               3,600

Actual sales units                                     5,000

Sales volume                                             1,400

Standard profit per unit                            × $1.7

Sales volume variance                            2,380 Favorable

Sales volume variance $2,380 favorable

The net effect on profit of AR-10's sales is that it will increase profit by $2,380