Answer
Sales-Volume Variance: \$14,400 U (Unfavorable)
Work Step by Step
Sales-Volume Variance:
Sales-Volume Variance measures the difference between the actual sales volume and the budgeted sales volume, considering the standard profit per unit.
Sales-Volume Variance = (Actual Sales - Budgeted Sales) \times (Standard Profit per Unit)
Sales-Volume Variance = (720 - 1,200) * (\$55 - \$25)
Sales-Volume Variance = (-480) * \$30 = \$14,400 U (Unfavorable)
Reconciliation with Production-Volume Variance:
The Sales-Volume Variance and the Production-Volume Variance are related. The Sales-Volume Variance measures the impact of selling fewer units than budgeted, resulting in a lower profit. The Production-Volume Variance measures the additional cost incurred due to lower production levels than budgeted. The two variances together indicate that the company produced more units than it sold, resulting in excess inventory, which incurred additional costs (Production-Volume Variance) and reduced profitability (Sales-Volume Variance).
