Scribd Logo
Upload

Welcome to Scribd!

  • 4 views

    Mix 1

    Uploaded by

    Etana Wirtu

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Mix 1

    Uploaded by

    Etana Wirtu
    4 views4 pages

    Original Title

    mix1

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    4 views4 pages

    Mix 1

    Uploaded by

    Etana Wirtu

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 4

    14-25 Variance analysis, multiple products.

    1. Budget for 2011

    Variable Contrib.
    Selling Cost Margin Units Sales Contribution
    Price per Unit per Unit Sold Mix Margin
    (1) (2) (3) = (1) – (2) (4) (5) (6) = (3) × (4)
    Kola $8.00 $5.00 $3.00 480,000 20% $1,440,000
    Limor 6.00 3.80 2.20 720,000 30 1,584,000
    Orlem 7.50 5.50 2.00 1,200,000 50 2,400,000
    Total 2,400,000 100% $5,424,000

    Actual for 2011


    Variable Contrib.
    Selling Cost Margin Units Sales Contribution
    Price per Unit per Unit Sold Mix Margin
    (1) (2) (3) = (1) – (2) (4) (5) (6) = (3) × (4)
    Kola $8.20 $5.50 $2.70 467,500 17% $1,262,250
    Limor 5.75 3.75 2.00 852,500 31 1,705,000
    Orlem 7.80 5.60 2.20 1,430,000 52 3,146,000
    Total 2,750,000 100% $6,113,250

     Actual Budgeted  Budgeted


    Sales-volume =  quantity of − quantity of  × contribution margin
    variance  units sold units sold 
     per unit

    Kola = ( 467,500 – 480,000) × $3.00 = $ 37,500 U


    Limor = ( 852,500 – 720,000) × $2.20 = 291,500 F
    Orlem = (1,430,000 – 1,200,000) × $2.00 = 460,000 F
    Total $714,000 F

     Actual units Budgeted units  Budgeted Budgeted


    Sales-quantity = of all − of all  × sales-mix × contribution margin
    variance  products sold products sold 
     percentage per unit

    Kola = (2,750,000 – 2,400,000) × 0.20 × $3.00 = $210,000 F


    Limor = (2,750,000 – 2,400,000) × 0.30 × $2.20 = 231,000 F
    Orlem = (2,750,000 – 2,400,000) × 0.50 × $2.00 = 350,000 F
    Total $791,000 F
    Actual units of  Actual Budgeted  Budgeted
    Sales-mix = all products ×  sales-mix – sales-mix  × contribution margin
    variance  percentage percentage 
    sold   per unit

    Kola = 2,750,000 × (0.17 – 0.20) × $3.00 = $247,500 U


    Limor = 2,750,000 × (0.31 – 0.30) × $2.20 = 60,500 F
    Orlem = 2,750,000 × (0.52 – 0.50) × $2.00 = 110,000 F
    Total $ 77,000 U

    2. The breakdown of the favorable sales-volume variance of $714,000 shows that the biggest
    contributor is the 350,000 unit increase in sales resulting in a favorable sales-quantity variance of
    $791,000. There is a partially offsetting unfavorable sales-mix variance of $77,000 in contribution
    margin.

    Alternative Calculation:
    Sales-Mix and Sales-Quantity Variance Analysis of Soda King for 2011

    Flexible Budget: Static Budget:


    Actual Units of Actual Units of Budgeted Units of
    All Products Sold All Products Sold All Products Sold
    × Actual Sales Mix × Budgeted Sales Mix × Budgeted Sales Mix
    × Budgeted Contribution × Budgeted Contribution × Budgeted Contribution
    Margin Per Unit Margin Per Unit Margin Per Unit
    Kola 2,750,000 × 0.17 × $3.00 = $1,402,500 2,750,000 × 0.2 × $3.00 = $1,650,000 2,400,000 × 0.2 × $3.00 = $1,440,000
    Limor 2,750,000 × 0.31 × $2.20 = 1,875,500 2,750,000 × 0.3 × $2.20 = 1,815,000 2,400,000 × 0.3 × $2.20 = 1,584,000
    Orlem 2,750,000 × 0.52 × $2.00 = 2,860,000 2,750,000 × 0.5 × $2.00 = 2,750,000 2,400,000 × 0.5 × $2.00 = 2,400,000
    $6,138,000 $6,215,000 $5,424,000

    $ 77,000 U $ 791,000 F
    Sales-mix variance Sales-quantity variance

    $714,000 F
    Sales-volume variance

    F = favorable effect on operating income; U= unfavorable effect on operating income


    14-26 Market-share and market-size variances (continuation of 14-25).

    Actual Budgeted
    Western region 27.5 million 20 million
    Soda King 2.75 million 2.4 million
    Market share 10% 12%

    Average budgeted contribution margin per unit = $2.26 ($5,424,000 ÷ 2,400,000)


    Solution Exhibit 14-26 presents the sales-quantity variance, market-size variance, and market-
    share variance for 2011.

     Actual Budgeted  Budgeted contribution


    Market share = Actual market ×  market – market  × margin per composite
    variance size in units  share share 
     unit for budgeted mix

    = 27,500,000 × (0.10 – 0.12) × $2.26


    = 27,500,000 × .02 × $2.267
    = $1,243,000 U

     Actual Budgeted  Budgeted Budgeted contribution


    Market-size =  market size – market size  × market × margin per composite
    variance  in units in units 
     share unit for budgeted mix

    = (27,500,000 – 20,000,000) × 0.12 × $2.26


    = 7,500,000 × 0.12 × $2.26
    = 2,034,000 F

    The market share variance is unfavorable because the actual 10% market share was lower than
    the budgeted 12% market share. The market size variance is favorable because the market size
    increased 37.5% [(27,500,000 – 20,000,000) ÷ 20,000,000].

    Despite the unfavorable market-share variance, the increase in market size was enough to result
    in a favorable sales-quantity variance.

    Sales-Quantity Variance
    $791,000 F

    Market-share variance Market-size variance


    $1,243,000 U $2,034,000 F
    Alternative calculation:

    Market-Share and Market-Size Variance Analysis of Soda King for 2011


    Static Budget:
    Actual Market Size Actual Market Size Budgeted Market Size
    × Actual Market Share × Budgeted Market Share × Budgeted Market Share
    × Budgeted Average × Budgeted Average × Budgeted Average
    Contribution Margin Contribution Margin Contribution Margin
    Per Unit Per Unit Per Unit
    27,500,000 × 0.10a × $2.26b 27,500,000 × 0.12c × $2.26 b 20,000,000 × 0.12c × $2.26b
    $6,215,000 $7,458,000 $5,424,000
    $1,243,000 U $2,034,000 F
    Market-share variance Market-size variance
    $791,000 F
    Sales-quantity variance
    F = favorable effect on operating income; U = unfavorable effect on operating income
    a
    Actual market share: 2,750,000 units ÷ 27,500,000 units = 0.10, or 10%
    b
    Budgeted average contribution margin per unit $5,424,000 ÷ 2,400,000 units = $2.26 per unit
    c
    Budgeted market share: 2,400,000 units ÷ 20,000,000 units = 0.12, or 12%

    You might also like