The Step Company has the following information for the year just ended: The Step Company's sales-price variance is:
A)$3,000 unfavorable.
B)$7,000 unfavorable.
C)$7,000 favorable.
D)$7,500 unfavorable.
E)$7,500 favorable.

Question

The Step Company has the following information for the year just ended:  The Step Company's sales-price variance is:
A)$3,000 unfavorable. 
B)$7,000 unfavorable. 
C)$7,000 favorable. 
D)$7,500 unfavorable. 
E)$7,500 favorable.

Quizplus · Accepted Answer

The sales-price variance is calculated by taking the difference between the actual selling price and the budgeted selling price, and multiplying that by the actual quantity sold.

Sales-price variance = (actual selling price - budgeted selling price) x actual quantity sold

In this case, the actual selling price was $210 per unit and the budgeted selling price was $200 per unit, resulting in a favorable variance of $10 per unit. The company sold 700 units, so the total sales-price variance is:

Sales-price variance = ($10 per unit x 700 units) = $7,000 favorable.

Therefore, the answer is C.

The Step Company Has the Following Information for the Year