Question

Use the following data for questions 17 and 19:

Roye Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During September, the kennel budgeted for 3,300 tenant-days, but its actual level of activity was 3,330 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for September:
Static budget for September: (Fixed element per month = FE, Variable element per tenant-day = VE)
Revenue: FE = - VE = $34.70
Wages and salaries: FE = $2,600 VE = $7.70
Expendables: FE = $1,400 VE = $14.50
Facility expenses: FE = $8,200 VE = $3.30
Administrative expenses: FE = $6,700 VE = $0.20
Total expenses: FE = $18,900 VE = $25.70
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Actual results for September:
Revenue: $112,721
Wages and salaries: $28,691
Expendables: $50,435
Facility expenses: $18,899
Administrative expenses: $7,096

The sales price variance for September would be closest to:
A. $1,789 U
B. $2,830 U
C. $2,830 F
D. $1,789 F

Answer 1

The sales price variance for Roye Kennel for September is calculated by subtracting the actual revenue from the budgeted revenue at the actual level of activity, resulting in a $2,830 unfavorable variance.

Step-by-step explanation:

To calculate the sales price variance, we need to compare the actual revenue to what it would have been if the company had achieved its expected sales volume at the budgeted price. The budgeted revenue for 3,330 tenant-days at the budgeted price of $34.70 per tenant day would be 3,330 x $34.70 = $115,551. The actual revenue was only $112,721. Therefore, the sales price variance is $115,551 - $112,721 = $2,830 unfavorable, because the actual revenue is less than the budgeted revenue at the actual level of activity.