Paris Perfumery sells two perfumes, L'Amour and Plaisir. The expected sales mix is one bottle of L'Amour to five bottles of Plaisir. Planned sales and variable costs for last period were as follows: During the period there was an economic downturn. Sales of L'Amour dropped off, so Paris reduced its price. Actual sales were as follows:
The sales price variance for L'Amour was:

Question

Paris Perfumery sells two perfumes, L'Amour and Plaisir. The expected sales mix is one bottle of L'Amour to five bottles of Plaisir. Planned sales and variable costs for last period were as follows:  During the period there was an economic downturn. Sales of L'Amour dropped off, so Paris reduced its price. Actual sales were as follows: 
The sales price variance for L'Amour was:

Quizplus · Accepted Answer

First, calculate the expected sales of L'Amour based on the sales mix:

Plaisir sales = 660,000 bottles 
L'Amour sales = 660,000 bottles ÷ 5 = 132,000 bottles

Expected total sales revenue: 
(132,000 × $365) + (660,000 × $79) = $53,670,000

Now, calculate the actual sales revenue: 
(92,400 × $305) + (698,160 × $79) = $46,905,240

The sales price variance for L'Amour is the difference between the expected revenue and the actual revenue for L'Amour:

Expected L'Amour revenue = 132,000 × $365 = $48,180,000 
Actual L'Amour revenue = 92,400 × $305 = $28,272,000

Sales price variance for L'Amour: 
$28,272,000 - $48,180,000 = -$19,908,000

Since the actual revenue is lower than the expected revenue, the variance is unfavorable, therefore the answer is D, $112,500 U

Paris Perfumery Sells Two Perfumes, L'Amour and Plaisir