Afos Sofas Inc. produces two models of sofas: Standard and Deluxe.

The expected total market sales of sofas were 250,000 sofas. The actual total market sales of sofas were 220,000 sofas.

Required:

A. Calculate the sales quantity variance.

B. Calculate the market size variance.

C. Explain why the budgeted operating income for Afos Sofas Inc. was less than expected.

Transcribed Image Text:

Budget Actual Standard Deluxe Standard Deluxe Selling price per unit $400 $900 $425 $850 Variable costs per unit $260 $670 $275 $685 Sales volume in units 4,000 6,000 6,800 4,200 Master Budget Actual Sales revenue $7,000,000 $6,460,000 Variable costs 5,060,000 4,747,000 Contribution margin 1,940,000 1,713,000 Fixed costs 867,500 938,500 Operating income $1,072,500 $ 774,500