[Goal75]

This is a question posted by Jeff under BEC – Test your might.

Can some one please explain why the answer is $8,300 Unfavorable? I keep getting $8,300 Favorable, I follow Yaeger and Cindy always said “as we go up the matrix, if the numbers are going up, then it is unfavorable”. So, based on that I think it is Favorable.

Please someone, explain if I am getting this all mixed up.

Thanks.

Test Your Might: BEC – Planning, Control & Analysis

Thanks for your response! Here is the answer explanation from Wiley: Central Winery manufactured two products, A and B. Estimated demand for product A was 10,000 bottles and for product B was 30,000 bottles. The estimated sales price per bottle for A was $6.00 and for B was $8.00. Actual demand for product A was 8,000 bottles and for product B was 33,000 bottles. The actual price per bottle for A was $6.20 and for B was $7.70. What amount would be the total selling price variance for Central Winery? a. $3,700 favorable. b. $8,300 unfavorable. c. $14,100 favorable. d. $3,700 unfavorable. b. This answer is correct. The requirement is to calculate the selling price variance. This answer is correct because the selling price variance is equal to actual sales multiplied by the difference between actual sales price and standard sales price. Therefore the variance is equal to $8,300 unfavorable [(8,000 x ($6.20 – $6.00)]+ [33,000 x ($7.70 – $8.00)].

REG 83 (Lost credit), 78 🙂
AUD 8/29/13
BEC 67, 75
FAR 76

[Anonymous]

It is Unfavorable because the net analysis for the variance is that they made 33,000 of B but sell at .30 cents less ($8-$7.7)and manufacture less of A but sell for .20cents more ($6-$6.2).

Therefore 33,000 X.3= ($9,900) unfavorable

and 8000 X.20 = $1,600 Favorable

Plug information into your variance formula

Actual selling price is being used here

[Faintear]

You can also try to think the logic through here.

You are estimating that you can sell item A for $6, but you can sell it for $6.20, so you're making MORE than you thought.

(6.2-6)x8000 = 1600 Favorable

You are estimating that you can sell item B for $8, but you can only sell it for $7.7, so you're making LESS than you thought.

(8-7.7)x33000 = 9900 Unfavorable

9900 U – 1600 F = 8300 U

[Goal75]

Thank you, CPAexamhard & Faintear. I missed reading the question for the part “Selling Price Variance”. Like many on this board have stressed, I should RTFQ, arghhhhh.

Good luck on your exams!

REG 83 (Lost credit), 78 🙂
AUD 8/29/13
BEC 67, 75
FAR 76

[Anonymous]

BUMP…

The correct answer to this question contradicts the Becker mnemonic…” It is ALWAYS S-A=D. (Standard-Actual= Difference)”.

In this question it calculates A-S=Difference.

Am I missing something?

[Anonymous]

I'm just gonna tell myself that SALES PRICE VARIANCES are an exception while also considering the economics of the situation.

[Kimboroni]

I just got this question last night, and to solve it, I used the note I had written to myself earlier in the evening:

When comparing price, use the actual quantity. AQ(AP-SP)

When comparing quantity, use the standard price. SP(AQ-SQ)

AUD 84 (1/9/14-Wiley books/TB + free materials)
FAR 83 (5/21/14-the above + NINJA 10 Pt Combo Lite)
REG 84 (7/9/14-Wiley books/TB + NINJA Audio/FC/Notes)
BEC 76 (10/5/14-Wiley books/TB + NINJA Audio/FC)

Disclaimer: My ninja avatar is not meant to imply that I have any affiliation with this site other than being a forum member. That's a pic of a T-shirt that my daughter gave me for my birthday. 🙂

[Anonymous]

That's a good one! I understand your mnemonic however (for future readers) that only applies to OH variances.

The trouble I was having was realizing the difference between material, labor, and overhead variance. Each type of variance is calculated a little differently.

Thanks!

[Kimboroni]

Huh? Are you referring to this?

When comparing price, use the actual quantity. AQ(AP-SP)

When comparing quantity, use the standard price. SP(AQ-SQ)

This works like a charm for material variances.

.

.

For labor variances, you can use this similar trick:

When comparing rate, use the actual hours. AH(AR-SR)

When comparing hours, use the standard rate. SR(AH-SH)

.

.

It only works for some of OH.

AUD 84 (1/9/14-Wiley books/TB + free materials)
FAR 83 (5/21/14-the above + NINJA 10 Pt Combo Lite)
REG 84 (7/9/14-Wiley books/TB + NINJA Audio/FC/Notes)
BEC 76 (10/5/14-Wiley books/TB + NINJA Audio/FC)

Disclaimer: My ninja avatar is not meant to imply that I have any affiliation with this site other than being a forum member. That's a pic of a T-shirt that my daughter gave me for my birthday. 🙂

[Author]

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