Question

Barrington Industries anticipated selling 29,000 units of a major product and paying sales commissions of $6 per unit. Actual sales and sales commissions totaled 31,500 units and $182,700, respectively. If the company used a static budget for performance evaluations, Barrington would report a cost variance of: Multiple Choice $6,300U. $6,300F. $8,700U. $8,700F. None of the answers is correct.

Answer 1

Barrington would report $8,700U cost variance.

Step-by-step explanation:

This can be calculated as follows:

Actual sales commissions = $182,700

Budgeted sales commissions = Anticipated sales units * commissions of per unit = 29,000 * $6 = $174,000

Sales commission cost variance = Actual sales commissions - Budgeted sales commissions = $182,700 - $174,000 = $8,700U

Since the Actual sales commissions is greater than Budgeted sales commissions, the cost variance is unfavourable and Barrington would report $8,700U cost variance.