Paris Perfumery sells two perfumes, L'Amor 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: The revenue volume variance for L'Amour was

Question

Paris Perfumery sells two perfumes, L'Amor 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:  The revenue volume variance for L'Amour was

Quizplus · Accepted Answer

The revenue volume variance measures the effect of actual sales volume differing from budgeted sales volume on total revenue.

Expected sales mix: 1 L'Amour : 5 Plaisir
Planned sales (in units): L'Amour = 3,150 ; Plaisir = 15,750
Actual sales (in units): L'Amour = 3,000 ; Plaisir = 17,500

Total revenue from L'Amour:
Planned sales volume = 3,150 units x $100 per unit = $315,000
Actual sales volume = 3,000 units x $100 per unit = $300,000

Revenue volume variance for L'Amour = Actual revenue - Budgeted revenue
= $300,000 - $315,000
= -$15,000

Therefore, the revenue volume variance for L'Amour is $15,000 unfavorable (or $15,000 U). Option A is the correct answer.

Paris Perfumery Sells Two Perfumes, L'Amor and Plaisir