In a recent year, BMW sold 217,044 of its 1 Series cars. Assume the company expected to sell 226,244 of these cars during the year. Also assume the budgeted sales price for each car was $26,000, and the actual sales price for each car was $26,300.

AQ - Actual Quantity

SQ - Standard Quantity

AP - Actual Price

SP - Standard Price

Compute the sales price variance and the sales volume variance.

Sales Price variance

$65,113,200

Sales Volume Variance

$239,200,000

Explanation:

sales price variance formula

(Actual Price - Standard Price) x Actual Units Sold

(26,300 - 26000) x 217,044

=$65,113,200 (Favourable)

Sales Volume Variance formula

(Actual Units Sold - Budgeted Units Sales) x Budgeted Selling Price.

(217,044 - 226,244) x $26000

= $239200000 (unfavorable)

The answers are:

+ Sales price variance: $65,113,200

+ Sales volume variance: $ (239,200,000)

Explanation:

We have detailed calculations shown as below:

Sales price variance = (Actual unit sales price - budgeted unit sales price) x actual unit sold = (26,300 - 26,000) x 217,044 = $65,113,200;

Sales volume variance = (Actual unit sold - Budgeted unit sold) x budgeted unit sales price = (217,044 - 226,244) x 26,000 = $ (239,200,000).

So, for BMW recent year, we have:

+ Sales price variance: $65,113,200;

+ Sales volume variance: $ (239,200,000).