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14-24 (60 min.) Variance analysis, multiple products.

1. Budget for 2003

VariableContrib.

 Selling    CostMargin UnitsSalesContribution

Priceper Unitper Unit  SoldMix     Margin

 (1)(2)(3) = (1) – (2)    (4) (5)(6) = (3) × (4)

Kola$6.00$4.00$2.00400,000  16%$   800,000

Limor  4.00  2.80  1.20600,000  24     720,000

Orlem  7.00  4.50  2.501,500,000  60  3,750,000

Total2,500,000100%$5,270,000

Actual for 2003 VariableContrib.

Selling  CostMargin  UnitsSalesContribution

Priceper Unitper Unit  SoldMix     Margin

   (1)(2)(3) = (1) – (2)    (4) (5)(6) = (3) × (4)

Kola$6.20$4.50$1.70480,000  16%$   816,000

Limor4.252.75  1.50900,000  30  1,350,000

Orlem6.804.60  2.201,620,000 54 3,564,000

Total3,000,000100%$5,730,000

Solution Exhibit 14-24 presents the sales-volume, sales-quantity, and sales-mix variances for each product and in total for 2003.

Sales-volume

   variance

Actual sales     Budgeted salesBudgeted

=   quantity  –     quantity×contrib. margin

in unitsin unitsper unit

Kola=(   480,000 –    400,000) × $2.00= $160,000 F

Limor=(   900,000 –    600,000) × $1.20=  360,000 F

Orlem=(1,620,000 – 1,500,000) × $2.50=  300,000 F

Total$820,000 F

Actual unitsBudgeted unitsBudgetedBudgeted

Sales-quantity

     variance

=of all products  – of all products×   sales-mix× contrib. margin

sold  soldpercentage  per unit

Kola=(3,000,000 – 2,500,000) × 0.16 × $2.00=$   160,000 F

Limor=(3,000,000 – 2,500,000) × 0.24 × $1.20=     144,000 F

Orlem=(3,000,000 – 2,500,000) × 0.60 × $2.50=     750,000 F

Total$1,054,000 F

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