Question

Master Products has the following information for the year just ended:

Budget Actual

Sales in units 15,000 14,000

Sales $150,000 $147,000

Less: Variable expenses 90,000 82,600

Contribution margin $ 60,000 $ 64,400

Less: Fixed expenses 35,000 40,000

Operating income $ 25,000 $ 24,400

61. The company's sales-volume variance is:

A. $3,000 unfavorable.

B. $4,000 unfavorable.

C. $4,400 favorable.

D. $10,000 unfavorable.

E. $10,000 favorable.

Answer 1

The sales-volume variance is calculated by multiplying the standard contribution margin per unit by the difference in actual and budgeted sales in units, resulting in a $4,000 unfavorable variance for Master Products.

Step-by-step explanation:

To calculate the sales-volume variance, we compare the difference in the number of units sold (actual vs. budgeted) and multiply this by the standard contribution margin per unit. The formula for the sales-volume variance is as follows:

1. Calculate the standard contribution margin per unit: (Budgeted Sales - Budgeted Variable Expenses) / Budgeted Sales in units.
2. Calculate the difference in sales volume: Actual Sales in Units - Budgeted Sales in Units.
3. Multiply the standard contribution margin per unit by the difference in sales volume.

Using the information provided:

1. Standard contribution margin per unit = ($150,000 - $90,000) / 15,000 units = $4 per unit.
2. Difference in sales volume = 14,000 units (Actual) - 15,000 units (Budgeted) = -1,000 units.
3. Sales-volume variance = $4 per unit * (-1,000 units) = $4,000 unfavorable.

Therefore, the correct answer is: B. $4,000 unfavorable.