Boris Bangles planned to sell 280,000 banjos at $400 each,but actually sold 250,000 at $425 each.Which is true of BB's price variances?

Question

Quizplus · Accepted Answer

To calculate the price variance, we need to find the difference between the actual total revenue and the budgeted or expected total revenue.

Budgeted revenue = 280,000 x $400 = $112,000,000 
Actual revenue = 250,000 x $425 = $106,250,000

Price variance = Actual revenue - Budgeted revenue 
Price variance = $106,250,000 - $112,000,000 = -$5,750,000 (unfavorable)

Since the actual revenue is lower than the budgeted revenue, the price variance is unfavorable. However, the question is asking for the amount of the variance, which is $5,750,000. Therefore, the correct answer is C: $6.25 million favorable is incorrect because the variance is unfavorable. B: $12 million favorable is incorrect because the actual revenue is lower than the budgeted revenue. D: $5.75 million favorable is the correct amount of the variance, but the question is asking for the description of the variance, which is unfavorable. E: None of the choices are correct is incorrect because choice C is the correct answer.

Boris Bangles Planned to Sell 280,000 Banjos at $400 Each,but