Question

Sunland Sports sells volleyball kits that it purchases from a sports equipment distributor. The following static budget based on sales of 1,940 kits was prepared for the year. Fixed operating expenses account for 78% of total operating expenses at this level of sales.
Sales $ 97,000
Cost of goods sold (all variable) 58,200
Gross margin 38,800
Operating expenses 33,950
Operating income $ 4,850
Assume that during the year Sunland Sports actually sold 2,037 volleyball kits during the year at a price of $47 per kit.
Required:
1. Calculate the sales price variance.

Answer 1

Answer:

$6,111  unfavorable variance

Explanation:

The budgeted sales price can be determined by dividing budgeted sales of $97,000 by the budgeted sales volume of 1,940 kits i.e $50  ($97,000/1940)

However,2037 volleyball kits were sold for $47 each instead of the planned $50 per kit.

sales price variance=(actual sales volume*actual sales price)*(budgeted sales price*actual sales volume)

actual sales volume is 2037

actual sales price is $47

budgeted sales price is $50

sales price variance=($47*2037)-($50*2037)=$-6111