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Homework answers / question archive / Poco Merchandising anticipated selling 30,000 units of a major product and paying sales commissions of $7 per unit
Poco Merchandising anticipated selling 30,000 units of a major product and paying sales commissions of $7 per unit. Actual sales and sales commissions totalled 32,500 units and $185,700, respectively. What would be the cost variance, if the company used a static budget and a flexi budget for performance evaluations?
Computation of Cost Variance, if the company used a static budget for performance evaluations:
Material Quantity Variance = SP*(AQ-SQ)
= $7*(32,500-30,000)
= $17,500 U
Material price variance = $185,700-32,500*$7 = $41,800 F
Therefore,
Cost variance = $17,500 U - $41,800 F= $24,300 F
Computation of Cost Variance, if the company used a flexi budget for performance evaluations:
Budgeted Sales = 30,000 units
Budgeted Commision = $7 per Unit
Actual Sales = 32,500 units
Sales commision at budgeted Rate = 32,500*$7 = $227,500
Actual Sales commision = $185,700
Cost Variance = $227,500 - $185,700 = $41,800 F
