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The Step Company has the following Information for the year just ended: Sales in units Sales Less: Variable Expenses Contribution Margin Less: Fixed Expenses Operating Income Budget 15,800 $150,000 90,000 $ 60,000 35,800 $ 25,000 Actual 14,860 $147,000 82,600 $ 64,400 40,000 $ 24,400 The Step Company's sales-price variance is: Multiple Choice O $3,000 unfavorable $7
The Step Company has the following Information for the year just ended: Sales in units Sales Less: Variable Expenses Contribution Margin Less: Fixed Expenses Operating Income Budget 15,800 $150,000 90,000 $ 60,000 35,800 $ 25,000 Actual 14,860 $147,000 82,600 $ 64,400 40,000 $ 24,400 The Step Company's sales-price variance is: Multiple Choice O $3,000 unfavorable $7.000 unfavorable. $7,000 favorable. $7,500 unfavorable.
Expert Solution
Calculation of sales price variance as follows:
Budgeted selling price = $150,000 / 15,000 units = $10.00 per unit.
Actual selling price = $147,000 / 14,000 units = $10.50 per unit.
Now,
Sales-price variance = (Actual selling price - Budgeted selling price) x Actual quantity sold
= ($10.50 - $10.00) x 14,000 units
= $7,000 Favorable.
Therefore, option (c) i.e. $7,000 favorable is the correct answer.
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