The exhibit below reflects a summary of performance for a single item of a retail store's inventory for the month ended April 30: (CIA adapted) The sales volume variance is:
A)$10,000 favorable.
B)$10,000 unfavorable.
C)$11,000 favorable.
D)$12,000 unfavorable.

Question

The exhibit below reflects a summary of performance for a single item of a retail store's inventory for the month ended April 30: (CIA adapted)  The sales volume variance is:
A)$10,000 favorable. 
B)$10,000 unfavorable. 
C)$11,000 favorable. 
D)$12,000 unfavorable.

Quizplus · Accepted Answer

The sales volume variance is the difference between the actual sales revenue and the expected sales revenue based on the budgeted sales volume.

Actual sales revenue = Actual selling price x Actual sales volume = $80,000

Expected sales revenue based on budgeted sales volume = Budgeted selling price x Budgeted sales volume = $90,000

Therefore, the sales volume variance = Actual sales revenue - Expected sales revenue based on budgeted sales volume = $80,000 - $90,000 = -$10,000

Since the variance is negative, it means that the actual sales volume is lower than the budgeted sales volume, which is unfavorable. Hence, the correct choice is B) $10,000 unfavorable.

The Exhibit Below Reflects a Summary of Performance for a Single