Opal Manufacturing Company Established the Following Standard Price and Cost

question 13

Essay

Opal Manufacturing Company established the following standard price and cost information: $\begin{array}{|l|r|}\hline \text { Sales price } & \$ 50 \text { per unit } \\\hline \text { Variable manufacturing cost } & 32 \text { per unit } \\\hline \text { Fixed manufacturing cost } & \$ 100,000 \text { total } \\\hline \text { Fixed selling and administrative cost } & \$ 40,000 \text { total } \\\hline\end{array}$ Opal expected to produce and sell 25,000 units.Actual production and sales amounted to 26,500 units.
Required:
(a)Determine the sales volume variances,including variances for number of units,sales revenue,variable manufacturing cost,fixed manufacturing cost,and fixed selling and administrative cost.
(b)Classify the variances as favorable (F)or unfavorable (U).
(c)Comment on the usefulness of the variances with respect to performance evaluation.
(d)Explain why the fixed cost variances are zero.

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Definitions:

Stimulus-response Model

A sales model based on the belief that certain stimuli can elicit predictable responses from consumers, guiding sales tactics.

Black Box

The unobservable, internal process taking place within the mind of the prospect as he or she reaches a decision whether or not to buy.

Product Advantage

The unique benefits or features that make a product superior to competing offerings in the eyes of the target market.

Individual Factors

Personal characteristics or traits that affect consumer behavior, including age, income level, education, and personal preferences.