A machine distributor sells two models, basic and deluxe. The following information relates to its master budget.  Basic       Deluxe
Sales (units) 8,000 2,000
Sales price per unit $8,000 $12,000
Variable costs per unit $6,400 $9,000

Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the same as the budgeted sales prices for both models.

Required:
a. What is the sales activity variance for the basic model?
b. Is the sales activity variance for the basic model favorable or unfavorable? What is the sales activity variance for the deluxe model?
c. What is the sales mix variance for the basic model?
d. What is the sales quantity variance for the basic model?
e. What is the sales mix variance for the deluxe model based?
f. What is the sales quantity variance for the deluxe model?

A. $1,600,000

B. Unfavorable

$2,400,000

C. $1,344,000

D. $256,000

E. $2,520,000

F. $120,000

Explanation:

a. Calculation for What is the sales activity variance for the basic model

Sales activity variance=(7,000 - 8,000) *($8,000 - $6,400)

Sales activity variance=$1,000*$600

Sales activity variance= $1,600,000

Therefore Sales activity variance for the basic model will be $1,600,000

b. The sales activity variance for the basic model is UNFAVORABLE reason been that the sales amount is lesser than the budgeted amount

Calculation for What is the sales activity variance for the deluxe model

Sales activity variance=(2,800 - 2,000) *($12,000 - $9,000)

Sales activity variance=800*3,000

Sales activity variance= $2,400,000

Therefore the sales activity variance for the deluxe model will be $2,400,000

c. Calculation for What is the sales mix variance for the basic model

Sales mix variance=[7,000 - 8,000/10,000 *(7,000 + 2,800)] *($8,000 - $6,400)

Sales mix variance=[7,000 - 80% *(7,000 + 2,800)] *($8,000 - $6,400)

Sales mix variance=[7,000 - 80% *(9,800)] *($1,600)

Sales mix variance=[7,000 -7,840 ] *($1,600)

Sales mix variance=840*$1,600

Sales mix variance= $1,344,000

Therefore the sales mix variance for the basic model will be $1,344,000

d. Calculation for What is the sales quantity variance for the basic model

Sales quantity variance=(9,800 - 10,000) x (8,000/10,000) x ($8,000 - $6,400)

Sales quantity variance= $256,000

Therefore the sales quantity variance for the basic model will be $256,000

e. Calculation for What is the sales mix variance for the deluxe model based

Sales mix variance=[2,800 - 2,000/10,000 *(7,000 + 2,800)] *($12,000 - $9,000)

Sales mix variance=[2,800 - 20% *(7,000 + 2,800)] *($12,000 - $9,000)

Sales mix variance=[2,800 - 20% *(9,800)] *($3,000)

Sales mix variance=[2,800 -1,960 ] *($3,000)

Sales mix variance=840*$3,000

Sales mix variance= $2,520,000

Therefore the sales mix variance for the deluxe model based will be $2,520,000

f. Calculation for What is the sales quantity variance for the deluxe model

Sales quantity variance=(9,800 - 10,000) x (2,000/10,000) x ($12,000 - $9,000)

Sales quantity variance= $120,000

Therefore the sales quantity variance for the deluxe model will be $120,000

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