Question

In a recent year, BMW sold 182,158 of its 1 Series cars. Assume the company expected to sell 191,158 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.

Short answer

Answer

The sales price variance isfavorable.

The sales volume variance is unfavorable.

Step-by-step solution

Meaning of Sales Price Variance

Step 1: Meaning of Sales Price Variance

Sales price variance presents the difference between the actual sales price of a product and the standard price of the same quantity of the product. If the actual sales price is higher than the standard price, the variance is considered favorable and vice versa.

Computation of sales price variance

$$\begin{gathered} \mathbf{\text{Salesvolumevariance=}}\mathbf{\left(}\mathbf{\text{Actualquantity×Standardprice}}\mathbf{\right)}\mathbf{\text{-}}\mathbf{\left(}\mathbf{\text{Standardquantity×Standardprice}}\mathbf{\right)} \\ \mathbf{\text{=}}\mathbf{\left(}\mathbf{\text{182,158×\$30,200}}\mathbf{\right)}\mathbf{\text{-}}\mathbf{\left(}\mathbf{\text{182,158×\$30,000}}\mathbf{\right)} \\ \mathbf{\text{=5,501,171,600-5,464,740,000}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{36}\mathbf{,}\mathbf{431}\mathbf{,}\mathbf{600}\mathbf{\text{Favorable}}\mathbf{)} \end{gathered}$$

Computation of sales volume variance

$$\begin{gathered} \mathbf{\text{Salesvolumevariance=}}\left(\text{Actualquantity×Standardprice}\right)\mathbf{\text{-}}\left(\text{Standardquantity×Standardprice}\right) \\ \mathbf{\text{=}}\left(\text{182,158×\$30,000}\right)\mathbf{\text{-}}\left(\text{191,158×\$30,000}\right) \\ \mathbf{\text{=5,464,740,000-5,734,740,000}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{270}\mathbf{,}\mathbf{000}\mathbf{,}\mathbf{000}\left(\text{Unfavorable}\right) \end{gathered}$$