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A company has budgeted on selling 7000 units of X at a selling price of $30 per unit and 3000 units of Y at $40 per unit. The standard contribution per unit is 30% of selling price for both products.
They actually sell 8000 of X and 7000 of Y.What is the sales quantity variance?
the answer is $57500 favourable.please i would like to know how to get to the answer….thank you
All the quantity variance is looking at is the total quantity sold (ignoring any change in mix – that is dealt with in the mix variance).
So the actual total quantity sold was 15,000.
If they had been sold in the correct mix, then it would have been 7/10 x 15,000 = 10,500 units of X and 3/10 x 15,000 = 4,500 units of Y.The contribution would be (10,500 x $9) + ((4,500 x $12) = 148,500
The budget contribution is (7,000 x $9) + (3,000 x $12) = 99,000
The variance is therefore 49,500 favourable.
(I have checked our mock exam, and 49,500 is shown as the correct answer – 57,500 is not even one of the available choices)
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