Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 28

Davidson Corp. produces a single product: fireproof safety deposit boxes for home use. The budget going into the current year anticipated a selling price of $55 per unit. Because of competitive pressures, the company had to cut selling prices by 10 percent during the year. Budgeted variable costs per unit are $32, and budgeted total fixed costs are $156,000 for the year. Anticipated sales volume for the year was 10,000 units. Actual sales volume was 5 percent less than budget. What was the sales price variance for the year? Label this variance F (favorable) or U (unfavorable), as appropriate.

Step 1 of 7

The manufacturing process includes different types of costs which includes fixed costs and variable costs. It includes costs related to raw material, direct labor and direct manufacturing overheads. When variable costs are deducted from the sales price then it is called as contribution.