Pricing Strategy, Sales Variances Eastman, Inc., manufactures and sells three products: R, S, and T....
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Accounting
Pricing Strategy, Sales Variances
Eastman, Inc., manufactures and sells three products: R, S, and T. In January, Eastman, Inc., budgeted sales of the following.
Budgeted Volume
Budgeted Price
Product R
128,500
$27
Product S
152,400
21
Product T
23,000
21
At the end of the year, actual sales revenue for Product R and Product S was $3,411,200 and $3,310,000, respectively. The actual price charged for Product R was $26 and for Product S was $20. Only $10 was charged for Product T to encourage more consumers to buy it, and actual sales revenue equaled $601,000 for this product.
Required:
1. Calculate the sales price and sales volume variances for each of the three products based on the original budget.
Sales price variance
Sales volume variance
Product R
$
Unfavorable
$
Favorable
Product S
$
Unfavorable
$
Favorable
Product T
$
Unfavorable
$
Favorable
2. Suppose that Product T is a new product just introduced during the year. What pricing strategy is Eastman, Inc., following for this product? Penetration pricing strategy
Answer & Explanation
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