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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

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