[zieba]

I’m reviewing for BEC using Becker. Becker has imbued in me that it would be sad if I forgot that S-A=D. Yes? Ok, so you can imagine my surprise when the correct answer wasn’t one of the MCQ choices.

Company manufactures two products A and B. Estimated demand for A was 10,000 boxes and 30,000 boxes for product B. Estimates sales price for A was $6 and $8 for B. Actual demand for A was 8,000 boxes and actual demand for B was 33,000. Actual price per box was $6.20 and $7.70 for box B. What is the total selling price variance?

No problem, spend enough hours to know that…

P D A

U D S

R D A

E D S

and S-A=D

Price var = D * A

Price var = (S price – A price) * A units

Price var A = (6-6.20) * 8000 = -1,600

Price var B = (8-7.7) * 33,000 = + 9,900

net out = 8,300 favorable….. favorable….favorable… net unfavorable implies that price var for the larger item, B, is negative. However is you use S-A the standard price of 8 is more than the actual price of 7.70 so the net variance cannot be favorable.

OK. Now, my study material insists that it’s 8,300 unvaforable it even goes on to explain the answer as:

SPV = (actual selling price – Budgeted selling price per unit) * Actual units sold….

Which one is it? S-A or A-S?

the study materials claim that “the difference is calculated as standard – actual ALWAYS” but the problems seems to indicate the reverse.

I’ve got limited storage space up there, can anybody let me know which one to commit to memory? Thank you for your time!

AUD - 75*, 88 done 5/14! (*exp)
BEC - 74 , 77
REG - 65 , 76 (10 point combooo!!)
FAR - 69 , 75

Dr: perseverance
Dr: intelligence
Dr: luck
. Cr: . advisory score

[Roma]

@zieba,

It is indeed unfavorable $8,300.

To get this straight, forget about the formula for a moment. For Product B, your budget assumed that it would sell for $8.00 while you actually sold it at $7.70. So …… your selling price is $.30 less than you planned ……. and so you will generate LESS revenue than you expected (in this case $-.30 X 33,000 = $-9,900. If nothing else changes, your profit would be down by this same amount. That is bad.

I didn't use Becker, so I am not familiar with SAD. But, it sounds like that is for product costs – if your product cost is less than budget, then that would be favorable. So to generate favorable variances, you want costs to be lower than planned. But for selling prices, it is the other way – higher sales prices generate favorable sales / profit variances.

Hope this helps instead of confusing you even more – good luck !!!

Using Wiley
FAR = 94 Feb 2012
BEC = 92 April 2012
AUD = 95 July 2012
REG = 91 Nov 2012

[zieba]

Thanks!

Sometimes you just don't see something unless it's explained… and then it makes perfect sense. I will keep my eyes opened for this distinction in the future.

AUD - 75*, 88 done 5/14! (*exp)
BEC - 74 , 77
REG - 65 , 76 (10 point combooo!!)
FAR - 69 , 75

Dr: perseverance
Dr: intelligence
Dr: luck
. Cr: . advisory score

[Author]

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