Pricing Strategy, Sales Variances

Eastman, Inc., manufactures and sells three products: R, S, and T. In January, Eastman, Inc., budgeted sales of the following.

	Budgeted Volume	Budgeted Price
Product R	128,500	$27
Product S	152,400	21
Product T	23,000	21

At the end of the year, actual sales revenue for Product R and Product S was $3,411,200 and $3,310,000, respectively. The actual price charged for Product R was $26 and for Product S was $20. Only $10 was charged for Product T to encourage more consumers to buy it, and actual sales revenue equaled $601,000 for this product.

Required:

1. Calculate the sales price and sales volume variances for each of the three products based on the original budget.

	Sales price variance		Sales volume variance
Product R	$	Unfavorable	$	Favorable
Product S	$	Unfavorable	$	Favorable
Product T	$	Unfavorable	$	Favorable

2. Suppose that Product T is a new product just introduced during the year. What pricing strategy is Eastman, Inc., following for this product? Penetration pricing strategy