Acme Beds Inc. produces two models of beds, the Regular and the Majestic. Budgeted and actual data for the year for each model are as follows:   Budget Actual Regular Majestic Regular Majestic Selling price per unit $ 300 $ 800 $ 325 $ 700 Variable cost per unit $ 220 $ 590 $ 238 $ 583 Sales volume in units 4,500 5,500 7,200 4,800   Master Budget Actual Sales revenue $ 5,750,000 $ 5,700,000 Variable costs 4,235,000 5,512,000 Contribution margin $ 1,515,000 $ 1,188,000 Fixed costs 882,500 919,500 Operating income $ 632,500 $ 268,500   Market data for the year: Expected total demand 500,000 beds Actual total demand 666,667 beds     Required Calculate the sales quantity variance in total. Calculate the market share variance for Acme Beds. Calculate the market size variance for Acme beds. What do you consider the most important reason why actual operating income was less than budgeted operating income for the year? Explain your reasoning.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
icon
Concept explainers
Question

Acme Beds Inc. produces two models of beds, the Regular and the Majestic. Budgeted and actual data for the year for each model are as follows:

 

Budget Actual

Regular Majestic Regular Majestic

Selling price per unit $ 300 $ 800 $ 325 $ 700

Variable cost per unit $ 220 $ 590 $ 238 $ 583

Sales volume in units 4,500 5,500 7,200 4,800

 

Master Budget Actual

Sales revenue $ 5,750,000 $ 5,700,000

Variable costs 4,235,000 5,512,000

Contribution margin $ 1,515,000 $ 1,188,000

Fixed costs 882,500 919,500

Operating income $ 632,500 $ 268,500

 

Market data for the year:

Expected total demand 500,000 beds

Actual total demand 666,667 beds

 

 

Required

Calculate the sales quantity variance in total.

Calculate the market share variance for Acme Beds.

Calculate the market size variance for Acme beds.

What do you consider the most important reason why actual operating income was less than budgeted operating income for the year? Explain your reasoning.

Expert Solution
steps

Step by step

Solved in 4 steps

Blurred answer
Knowledge Booster
Budgeting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education