Page 105 - P1 Integrated Workbook STUDENT 2018
P. 105
Variance analysis
Example 1
Jayco, a company who sells earplugs, budgets to produce and sell 1,000
boxes of earplugs but it actually makes and sells 1,100 boxes
The budgeted selling price of each box is $120 but the price was dropped to
$115 at the very start of the period.
The costs on the standard cost card are as follows:
Material cost $10
Labour cost $60
Variable overhead cost $8
Fixed overhead cost $12
Total cost $90
Calculate the sales price variance.
Solution
$
They did sell for (actual sales revenue) (1,100 units × $115) 126,500
Units sold should (actual sales units × standard sales price
have sold for per unit) 132,000
(1,100 units × $120)
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Sales price
variance (5,500)
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This is expressed as an adverse variance (lower revenue) of $5,500 because
a lower sales price was charged for all units sold.
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