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14-24 (Cont’d.)

Actual unitsActualBudgetedBudgeted

Sales-mix

 variance

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

soldpercentagepercentage  per unit

Kola=3,000,000 × (0.16 – 0.16) × $2.00=$           0

Limor=3,000,000 × (0.30– 0.24) ×  $1.20=  216,000 F

Orlem=3,000,000 × (0.54 – 0.60) × $2.50=  450,000 U

Total$234,000 U

2.The breakdown of the favorable sales-volume variance of $820,000 shows that the biggest contributor is the 500,000 unit increase in sales resulting in a favorable sales-quantity variance of $1,054,000. There is a partially offsetting unfavorable sales-mix variance of $234,000 in contribution margin.

SOLUTION EXHIBIT 14-24

Sales-Mix and Sales-Quantity Variance Analysis of Soda King for 2003

Flexible Budget:Static Budget:

Actual Units ofActual Units ofBudgeted Units of

All Products SoldAll Products SoldAll Products Sold

Actual Sales Mix Budgeted Sales Mix Budgeted Sales Mix

Budgeted Contribution Budgeted Contribution Budgeted Contribution

Margin Per UnitMargin Per UnitMargin Per Unit

Kola 3,000,000 0.16 $2 =$   960,0003,000,000   0.16 $2      = $   960,000      2,500,000 0.16 $2      = $   800,000

Limor3,000,000 0.30 $1.20 =  1,080,000 3,000,000   0.24 $1.20 =      864,000      2,500,000 0.24 $1.20 =      720,000

Orlem3,000,000 0.54 $2.50 =  4,050,0003,000,000   0.60 $2.50 =  4,500,000     2,500,000 0.60 $2.50 =  3,750,000

   $6,090,000$6,324,000                                                   $5,270,000

$234,000 U$1,054,000 F

Sales-mix varianceSales-quantity variance

                                                                                                                                $820,000 F

                                                                                                                       Sales-volume variance

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

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