Abrasive Brothers, Inc., manufactures brake pads for automobiles. For April 2017, the company's static budget projected 5,000 units would be produced and sold at a variable cost of $6 per unit and total fixed costs of $12,000. The budgeted selling price was $18 per unit. Actual results for April were somewhat disappointing in that the company produced and sold only 4,200 units at an actual price of $17.50 per unit.
-What sale price variance would the company report for April?
A) $0.50 Unfavorable.
B) $14,400 Unfavorable.
C) $14,000 Unfavorable.
D) $2,100 Unfavorable.

Question

Abrasive Brothers, Inc., manufactures brake pads for automobiles. For April 2017, the company's static budget projected 5,000 units would be produced and sold at a variable cost of $6 per unit and total fixed costs of $12,000. The budgeted selling price was $18 per unit. Actual results for April were somewhat disappointing in that the company produced and sold only 4,200 units at an actual price of $17.50 per unit. 
-What sale price variance would the company report for April?
A) $0.50 Unfavorable.
B) $14,400 Unfavorable.
C) $14,000 Unfavorable.
D) $2,100 Unfavorable.

Quizplus · Accepted Answer

The sales price variance is calculated as the difference between the actual selling price and the budgeted selling price, multiplied by the actual number of units sold. The variance is ($17.50 - $18.00) * 4,200 = -$0.50 * 4,200 = -$2,100, which is unfavorable.