Folsom Fashions sells a line of women's dresses. Folsom's performance report for November is shown below. (CMA adapted)

The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income.

Actual

Budget

Dresses sold

5,000

6,000

Sales

$235,000

$300,000

Variable costs

($145,000)

($180,000)

Contribution margin

$90,000

$120,000

Fixed costs

($84,000)

($80,000)

Operating income

$6,000

$40,000

1. The effect of the sales quantity variance on the contribution margin for November is:

$30000 U, $18000 U, $20000 U, $15000 U

2. The sales price variance for November is:

$30000 U, $18000 U, $20000 U, $15000 U

Question

Business

Marley Mullen

13 December, 23:50

Folsom Fashions sells a line of women's dresses. Folsom's performance report for November is shown below. (CMA adapted)

The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income.

Actual

Budget

Dresses sold

5,000

6,000

Sales

$235,000

$300,000

Variable costs

($145,000)

($180,000)

Contribution margin

$90,000

$120,000

Fixed costs

($84,000)

($80,000)

Operating income

$6,000

$40,000

1. The effect of the sales quantity variance on the contribution margin for November is:

$30000 U, $18000 U, $20000 U, $15000 U

2. The sales price variance for November is:

$30000 U, $18000 U, $20000 U, $15000 U

+3

Answers (1)

Know the Answer?

Genesis Schultz · Answer 1

(1) $20,000 U

(2) $15,000 U

Explanation:

(1) Effect of the sales quantity variance on the contribution margin for November:

= (Budget dresses sold - Actual dresses sold) * (Budgeted contribution margin : Budgeted dresses sold)

= (6,000 - 5,000) * (120,000 : 6,000)

= $20,000 unfavorable

(2) Sales price variance for November:

= [ (Budgeted sales : Budget dresses sold) - (Actual sales : Actual dresses sold) ] * Actual dresses sold

= [ (300,000 : 6,000) - (235,000 : 5000) ] * 5000

= $15,000 unfavorable