Question

Saudia Manufacturing Company established the following standard price and cost information:
            
Sales price   $   50   per unit
Variable manufacturing cost      32   per unit
Fixed manufacturing cost   $   100,000   total
Fixed selling and administrative cost   $   40,000   total

Saudia Company expected to produce and sell 25,000 units. Actual production and sales amounted to 26,500 units.

Required: Complete the following table
(a) Determine the sales volume variances, including variances for number of units, sales revenue, variable manufacturing cost, fixed manufacturing cost, and fixed selling and administrative cost.
(b) Classify the variances as favorable (F) or unfavorable (U).

Answer 1

Answer
Sales Price $ / Unit	$               50
Variable Manufacturing $ / Unit	$               32
Fixed manufacturing cost$	1,00,000
Fixed selling and Administrative cost $	40,000
Expected Production - Units	25000
Actual production	26500
	$ or Units	F/UF
1. Sales Volume Variance $
"( Actual unit sold- budgeted unit sold)* Budgeted selling price
(26500-25000)*$50/ Unit	$        75,000	( favorable )
2. Sales Revenue Variance $	$        75,000	( Favorable )
3. Variable Manufacturing cost - Variance
"( Actual unit sold- budgeted unit sold)*                                                         Budgeted Variable Manufacturing cost/ Unit
(26500-25000)*$32/ Unit	$        48,000	( Unfavorable)
Fixed cost zero because same cost has been used in Budget as well as Actual
Variance is the difference between budgeted and actual.
F = Favorable
U = Unfavorable