The controller of Pella Inc. created standards for variable costs for one of its products as:
____________________ Per Unit
Direct material .............................. $2.00
Direct labour ................................. 5.60
Variable overhead ........................... 1.25
At the beginning of the year, Pella Inc. estimated the average selling price to be $15 per unit and, at this price, estimated sales to be 70,000 units. Annual fixed costs were estimated to be $180,000.
Subsequent to year-end, the controller determined actual results to be sales of 75,000 units at an average price of $13.50 per unit. Total variable costs were $660,000 and total fixed costs were $192,000. There was no beginning or ending inventory.
Required:
Calculate the estimated results based on the revised estimated volume and compare them to the expected results using the original level of estimated sales. Compare the results.