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NeksTech Ltd manufactures high tech laptops which are widely used by graphic designers. Below is the static budget and actual results for last year. What is the total sales-volume variance for last year?  Static budget Actual resultsUnits sold 1,350 1,200Sales price per unit $2,399 $2,369Variable manufacturing cost per unit $1,750 $1,775Contribution margin (in total) $876,150 $712,800Fixed manufacturing costs $508,250 $489,950Operating profit $367,900 $222,850

Question

NeksTech Ltd manufactures high tech laptops which are widely used by graphic designers. Below is the static budget and actual results for last year. What is the total sales-volume variance for last year?  Static budget Actual resultsUnits sold 1,350 1,200Sales price per unit 2,3992,399 2,369Variable manufacturing cost per unit 1,7501,750 1,775Contribution margin (in total) 876,150876,150 712,800Fixed manufacturing costs 508,250508,250 489,950Operating profit 367,900367,900 222,850

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Solution

The sales volume variance can be calculated using the formula:

Sales Volume Variance = (Actual Quantity - Budgeted Quantity) * Standard Price

From the data provided:

Actual Quantity (AQ) = 1,200 units Budgeted Quantity (BQ) = 1,350 units Standard Price (SP) = $2,399

Substituting these values into the formula:

Sales Volume Variance = (1,200 - 1,350) * 2,399SalesVolumeVariance=1502,399 Sales Volume Variance = -150 * 2,399 Sales Volume Variance = -$359,850

So, the total sales volume variance for last year is -$359,850. This negative variance indicates that the company sold fewer units than it had budgeted for, resulting in lower sales revenue.

This problem has been solved

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