In September, Larson Inc. sold 45,000 units of its only product for $284,000, and incurred a total cost of $285,000, of which $29,000 were fixed costs. The flexible budget for September showed total sales of $360,000. Among variances of the period were: total variable cost flexible-budget variance, $8,500U; total flexible-budget variance, $71,000U; and, sales volume variance, in terms of contribution margin, $31,000U.
The total sales revenue in the master budget for September, to the nearest dollar, was:
$459,200
1. Budgeted SP/unit = FB sales (given)/actual sales volume (given) = $360,000/45,000 units = $8.00/unit.
2. Budgeted contribution margin per unit = Flexible budget (FB) contribution margin/actual sales volume
3. FB contribution margin = FB sales revenue ? FB variable costs.
4. Actual variable costs = ($285,000 (given) ? $29,000 (given)) = $256,000.
5. FB variable costs = $256,000 ? $8,500U variance = $247,500.
6. Total FB contribution margin = $360,000 (given) ? $247,500 = $112,500.
7. Budgeted contribution margin/unit = $112,500/45,000 units (given) = $2.50/unit.
8. Sales volume variance = Budgeted contribution margin/unit × (MB ? Actual) units sold.
9. $31,000U (given) = $2.50/unit × (X ? 45,000) units.
10. $31,000 / $2.50/unit = X ? 45,000 units
11. Therefore, X = 12,400 units + 45,000 units = 57,400 units
12. MB sales revenue = MB sales volume × budgeted selling price/unit = 57,400 units × $8.00/unit = $459,200 (rounded to the nearest whole dollar)
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