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14-32 (Cont'd.)

Overall, there was a favorable total sales-volume variance.  However, the large drop in PalmKid’s contribution margin per unit combined with a decrease in the actual number of PalmPro units sold as well as a drop in the actual contribution margin per unit below budget, led to the total contribution margin being much lower than budgeted.

Other factors could be discussed here––for example, it seems that the PalmKid did not achieve much success with a three digit price point––selling price was budgeted at $149 but dropped to $102.  At the same time, variable costs increased.  This could have been due to a marketing push that did not succeed.

14-33(20 min.)Market-share and market-size variances

(continuation of 14-32).

1.  

Actual

Budgeted

Worldwide

500,000

400,000

Aussie Info.

110,000

100,000

Market share

22%

25%

Average contribution margin per unit:

Actual = $108.80 ($11,968,000 110,000)

Budgeted  = $130.75 ($13,075,000 100,000)

=

=

500,000 (0.22 – 0.25) $130.75

=

500,000 (–0.03) $130.75

=

$1,961,250 U

=

=

(500,000 – 400,000) 0.25 $130.75

=

100,000 0.25 $130.75

=

$3,268,750 F

14-41

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