Topic: CONDUCTING MARKETING RESEARCH AND FORECASTING DEMAND Suppose the annual plan called for selling 34,000 widgets...

Topic: CONDUCTING MARKETING RESEARCH AND FORECASTING DEMAND Suppose the annual plan called for selling 34,000 widgets in the first quarter at $2 per widget, for total revenue of $68,000. At quarter's end, only 30,000 widgets were sold at $1.80 per widget, for total revenue of $54,000. Based on the Sales-variance analysis, how much of the sales performance is due to the price decline and how much to the volume decline? Note: Sales-variance analysis measures the relative contribution of different factors to a gap in sales performance.

Expert Solution

Sales Revenue Variance = Actual Sales - Budgeted Sales = $ 54,000 - $ 68,000 = $ 14,000 (Adverse)

Sales Volume Variance= (Actual Quamntity -Budget Quantity) * Budget Price

= (30,000 - 34,000)*2

= $ 8,000 (Adverse)

Sales Price Variance = (Actual Price - Budget Price)* Actual Quantity = (1.8-2)*30000 = $ 6,000 (Adverse)

Due to Volume it is - $ 8,000

Due to price it is - $ 6,000

Impact on total revenue = -6,000 - 8,000 = - $ 14,000

Rahul Sunny answered 7 months ago

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