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Paradise Company's planning budget for 10,000 units showed sales of $500,000. The flexible budget for 12,000 units showed sales of $600,000. What is the variance of $100,000 called if this variance was due only to an increase in unit sales?

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hamzatauseef

Answer:

Favorable Sales Volume Variance

Explanation:

This is an example of a favorable sales volume variance. This occurs when the actual sales are greater than the budgeted sales at any given price thus resulting in an increased total units sold.

Sales Volume variance has the following formula,

Volume Variance = Budgeted Selling Price * (Actual Units - Budgeted Units)

We do not need to calculate Budgeted selling price as the question specifies only unit difference.

Hope that helps.

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