Question
Carad Company operates an absorption costing system and sells three types of products, A, B, and C. Since the advent of Covid 19 the company
Carad Company operates an absorption costing system and sells three types of products, A, B, and C. Since the advent of Covid 19 the company has been struggling to maintain its revenues and profits due to the fall in consumer demand and the delays with its supply chain. Sales prices fluctuated in the market at the beginning of the quarter the company hired a consultant to assist management in setting its standard sales prices for the end of the quarter, which was March 2022. The manager for the sales department negotiates the actual prices with the customers.
The following are the budgeted figures for the quarter ending March 2022.
Fixed production overheads are absorbed based on direct machine hours and the budgeted cost of these for the quarter was $182,000. Products A, B, and C use 0.2 hours, 0.4 hours and 0.6 hours of machine time respectively.
The following data shows the actual sales prices and volumes achieved for each product for the quarter ending March 2022 as well as the average market prices per unit.
(a) Calculate for product C only, the sales price operational variance and the sales price planning variance. (b) Using the data provided, calculate the total sales mix variance and the total sales quantity variance.
\begin{tabular}{|c|c|c|c|c|} \hline Product & Budgetedproductionandsales(units) & Standardsellingpriceperunit($) & \multicolumn{2}{|c|}{\begin{tabular}{|c|} Standard varlable \\ production costs/unit \end{tabular}} \\ \hline A & 35,000 & 35 & 20 \\ \hline B & 30,000 & 40 & 26 \\ \hline C & 25,000 & 45 & 24 \\ \hline \end{tabular} The following variances have already been correctly calculated for products A and B : Sales price operational variances: Product A: $15,500 Adverse Product B: $48,640 Adverse Sales price planning variances Product A: $46,500 Adverse Product B: $42,560 AdverseStep by Step Solution
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