Wheat Inc. has an exclusive contract with an exporter. Two brands of wheat are imported, labeled AB and CD. The following data are provided for the current fiscal year:The total market was estimated to 40,000 bushels at the time of budget. The actual total market for the year is 32,000 bushels.
What is the firm's total sales quantity variance?
A) $0.
B) $3,500 unfavorable.
C) $4,000 favorable.
D) $37,500 favorable.
E) $50,000 favorable.

Question

Wheat Inc. has an exclusive contract with an exporter. Two brands of wheat are imported, labeled AB and CD. The following data are provided for the current fiscal year:The total market was estimated to 40,000 bushels at the time of budget. The actual total market for the year is 32,000 bushels.
What is the firm's total sales quantity variance?
A) $0. 
B) $3,500 unfavorable. 
C) $4,000 favorable. 
D) $37,500 favorable. 
E) $50,000 favorable.

Quizplus · Accepted Answer

We need to calculate the difference between the standard quantity of sales and the actual quantity of sales of both the brands (AB and CD).

Standard quantity = 40,000 / 2 = 20,000 bushels for each brand.

Actual quantity = 16,000 bushels for each brand.

Total standard quantity = 40,000 bushels while actual quantity is 32,000 bushels.

Total sales quantity variance = (Actual quantity - Standard quantity) x Standard price

= [(16,000 - 20,000) x Standard price] x 2 
= [-8,000 x Standard price] x 2

As we do not have the value of Standard price, we can't calculate the exact variance.

However, we know that the actual quantity sold is less than the standard quantity sold, which should result in an unfavorable variance.

Looking at the answer choices, the only option that represents an unfavorable variance is B) $3,500 unfavorable. Therefore, C) $4,000 favorable and D) $37,500 favorable cannot be the correct choices.

Thus, the best choice is:

Answer: B

Wheat Inc Has an Exclusive Contract with an Exporter