Afos Sofas Inc. produces two models of sofas: Standard and Deluxe.

The expected total market sales of sofas were 250,000 sofas. The actual total market sales of sofas were 220,000 sofas.

Required:

A. Calculate the sales quantity variance.

B. Calculate the market size variance.

C. Explain why the budgeted operating income for Afos Sofas Inc. was less than expected.

Budget Actual Standard Deluxe Standard Deluxe Selling price per unit $400 $900 $425 $850 Variable costs per unit $260 $670 $275 $685 Sales volume in units 4,000 6,000 6,800 4,200 Master Budget Actual Sales revenue $7,000,000 $6,460,000 Variable costs 5,060,000 4,747,000 Contribution margin 1,940,000 1,713,000 Fixed costs 867,500 938,500 Operating income $1,072,500 $ 774,500