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Multiple Choice QuestionA company had a standard sales price of $1.79 per unit and expected to sell 10,000 units. Due to a downturn in the economy, the product was marked down to $1.59 per unit and the company only sold 9,500 units. Calculate the sales price variance.Multiple choice question.$2,000 U$1,900 F$2,000 F$1,900 U

Question

Multiple Choice QuestionA company had a standard sales price of 1.79perunitandexpectedtosell10,000units.Duetoadownturnintheeconomy,theproductwasmarkeddownto1.79 per unit and expected to sell 10,000 units. Due to a downturn in the economy, the product was marked down to 1.59 per unit and the company only sold 9,500 units. Calculate the sales price variance.Multiple choice question.2,000U2,000 U1,900 F2,000F2,000 F1,900 U

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Solution

The sales price variance can be calculated using the formula:

Sales Price Variance = (Actual Selling Price - Standard Selling Price) * Actual Quantity Sold

Here, the actual selling price is 1.59,thestandardsellingpriceis1.59, the standard selling price is 1.79, and the actual quantity sold is 9,500 units.

So, the sales price variance is:

Sales Price Variance = (1.59−1.59 - 1.79) * 9,500 = -0.20∗9,500=−0.20 * 9,500 = -1,900

The negative sign indicates that the variance is unfavorable (U), because the actual selling price is less than the standard selling price. Therefore, the answer is $1,900 U.

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