Question 58

The sales price variance is $5,400 unfavorable.

The sales price variance can be calculated by taking the difference between the budgeted sales price and the actual sales price, then multiplying by the actual quantity sold. In this case, the variance is calculated as ($40 - $38) x 2,700 units, resulting in a $5,400 unfavorable variance.

A) $4,500 favorable

This option is incorrect because it miscalculates the variance. The calculation of the variance should reflect the difference between the budgeted price and the actual price, which is not aligned with this value. Furthermore, a favorable variance would indicate actual sales price exceeding budgeted sales price, which is not the case here.

B) $4,500 unfavorable

This option is also incorrect as it does not accurately reflect the calculated variance. The variance calculation should yield a larger unfavorable amount based on the actual sales price being lower than the budgeted price, thus resulting in a more significant loss than the $4,500 stated.

C) $5,400 favorable

This choice is incorrect because it incorrectly labels the variance as favorable. Although the numerical value matches the correct calculation, a favorable variance would imply that actual sales exceeded budgeted sales, which is not true in this scenario since the actual price is lower.

D) $5,400 unfavorable

This option is correct because it accurately represents the calculation of the sales price variance. The unfavorable nature of the variance indicates that the actual sales price was less than the budgeted sales price, resulting in a loss of revenue that is measured at $5,400.

Conclusion

The correct answer, $5,400 unfavorable, clearly reflects the negative impact of selling units for less than the budgeted price. All other options fail to accurately represent either the calculation or the nature of the variance, making them incorrect in the context of the provided data.