White Mountain Sled Company manufactures children’s snow sleds. The company’s performance report for November is as follows.
Actual | Budget | |
Sleds sold | 5,000 | 6,000 |
Sales | $240,000 | $300,000 |
Variable costs | 150,000 | 180,000 |
Contribution margin | $90,000 | $120,000 |
Fixed costs | 84,000 | 80,000 |
Operating income | $ 6,000 | $ 40,000 |
The company uses sales variance analysis to explain the difference between budgeted and actual sales revenue.
Required: Compute the following variances and indicate whether each is favorable or unfavorable.
1. November sales price variance.
2. November sales volume variance.
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