Scribd
Upload
234 views

Variance Analysis

The Adelaide Hares experienced variances in their ticket sales for the 2017 season. 1) A sales-volume variance of $37,100 unfavorable due to actual attendance being 20% below budget. 2) A sales-quantity variance of $29,900 unfavorable due to lower overall sales. 3) A sales-mix variance of $7,200 favorable from selling more upper-tier tickets than budgeted. The manager was unhappy that actual attendance was significantly below budget given the strong local economy, and lower-tier seats sales decreased the most.

Uploaded by

Elliot Richard
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
234 views

Variance Analysis

The Adelaide Hares experienced variances in their ticket sales for the 2017 season. 1) A sales-volume variance of $37,100 unfavorable due to actual attendance being 20% below budget. 2) A sales-quantity variance of $29,900 unfavorable due to lower overall sales. 3) A sales-mix variance of $7,200 favorable from selling more upper-tier tickets than budgeted. The manager was unhappy that actual attendance was significantly below budget given the strong local economy, and lower-tier seats sales decreased the most.

Uploaded by

Elliot Richard
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

Variance analysis, multiple products.

The Adelaide Hares play in the Australian Cricket


League. The Hares play in the Bogga Arena, which is owned and managed by the City of
Adelaide. The arena has a capacity of 17,500 seats (6,500 lower-tier seats and 11,000 upper-tier
seats). The arena charges the Hares a per-ticket charge for use of its facility. All tickets are sold
by the Reservation Network, which charges the Hares a reservation fee per ticket. The Hares’
budgeted contribution margin for each type of ticket in 2017 is computed as follows:

There was no difference between the budgeted and actual contribution margin for lower-tier or
upper-tier seats.
The manager of the Hares was unhappy that actual attendance was 20% below budgeted
attendance per game, especially given the booming state of the local economy in the past six
months.
1. Compute the sales-volume variance for each type of ticket and in total for the Adelaide Hares
in 2017.
(Calculate all variances in terms of contribution margins.)
2. Compute the sales-quantity and sales-mix variances for each type of ticket and in total in
2017.
3. Present a summary of the variances in requirements 1 and 2. Comment on the results.

(30–40 min.) Variance analysis, multiple products.

( Actual sales ( Budgeted sales


Budgeted contribution
) quantity in units )
1. = (quantity in units – ¿  margin per ticket

Lower-tier tickets = (3,600 – 5,500)  $17 = $32,300 U


Upper-tier tickets = (6,400 – 7,000)  $ 8 = 4,800 U
All tickets $37,100 U

Budgeted average (5,500  $17)  (7,000  $8)


2. contribution margin per unit = 12, 500
$93,500  $56,000 $149,500
= 12,500 = 12,500
= $11.96 per unit (seat sold)
Sales-mix percentages:
Budgeted Actual
5,500 3, 600
Lower-tier 12,500 = 10, 000 =
0.44 0.36

7, 000 6, 400
Upper-tier 12,500 = 10, 000 =
0.56 0.64
Solution Exhibit 14-25 presents the sales-volume, sales-quantity, and sales-mix variances for
lower-tier tickets, upper-tier tickets, and in total for Adelaide Hares in 2017.

The sales-quantity variances can also be computed as:


 Actual units Budgeted units  Budgeted Budgeted
 of all tickets  of all tickets  sales-mix cont . margin
 sold sold 
=    percentage  per ticket

The sales-quantity variances are:


Lower-tier tickets = (10,000 – 12,500) × 0.44 × $17 = $18,700 U
Upper-tier tickets = (10,000 – 12,500) × 0.56 × $ 8 = 11,200 U
All tickets $29,900 U

The sales-mix variance can also be computed as:


Actual units  Actual Budgeted  Budgeted
of all tickets  sales-mix  sales-mix   contribution margin
  per ticket
= sold ×  percentage percentage 

The sales-mix variances are


Lower-tier tickets = 10,000 × (0.36 – 0.44) × $17 = $13,600 U
Upper-tier tickets = 10,000 × (0.64 – 0.56) × $ 8 = 6,400 F
All tickets $ 7,200 U

3. The Adelaide Hares average attendance decreased by 20% per game relative to the
budget. Moreover, the sales of the higher contribution margin lower-tier seats (budgeted
contribution margin of $17 per seat) decreased even more sharply by 34.5% [(3,600 – 5,500) ÷
5,500]. The net result: the actual contribution margin was $37,100 below the budgeted
contribution margin.

You might also like