Sales price and sales quantity variance

Xanetics, Inc., recently received a $150,000 special order from Lartech, Inc., for some customized equipment. A 50 percent deposit accompanied the order, with the remaining $75,000 payment to be made at delivery. Xanetics manufactured the equipment and was ready to ship it to Lartech when it was notified that Lartech had declared bankruptcy.

Required:

Identify the accounting issues related to the above scenario. Has Xanetics earned a revenue?

Has it been realized? Should the company recognize any revenue?

Hills Dog Food generated revenues of $5,000,000 during 2010 by selling 1,000,000 bags of dog food. The master budget of Hills shows expected sales of 1,200,000 bags of dog food generating $5,760,000 in revenue.

What are the sales price and sales quantity variances?

Solution: