Howerton, Inc., manufactures and sells three products: K, M, and P. In January, Howerton, Inc., budgeted sales of the following:

At the end of the year, actual sales for Product K and Product M were \($5,600,000\) and \($3,270,000\), respectively. The actual price charged for each was equal to the budgeted price. Product P, however, had revenues of \($600,000\). While total revenue was higher than expected, the actual price of \($10\) represented a last-minute revision from budget to increase consumer acceptance of the product.

Required:

1. Calculate the sales price and price volume variances for each of the three products based on the original budget.
2. Suppose that Product P is a new product just introduced during the year. What pricing strategy is Howerton, Inc., following for this product?

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Budgeted Volume Budgeted Price Product K 110,000 $50 Product M Product P 165,000 20 20,000 20