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Concept explainers
1.
Compute the contribution margin variance.
1.
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Explanation of Solution
Contribution margin variance: Contribution margin variance reflects difference between the actual contribution margin and budgeted contribution margin. It is computed using the given formula:
Compute the contribution margin variance:
Particulars | Model 1 | Model 2 | Model 3 | Total |
Actual results: | ||||
Sales: | $141,700 | $89,080 | $32,810 | $263,590 |
Less: Variable expenses | ($49,050) | ($44,540) | ($13,510) | ($10,7100) |
Actual Contribution margin | $92,650 | $44,540 | $19,300 | $156,490 |
Budgeted results: | ||||
Sales: | $135,000 | $91,000 | $30,000 | $256,000 |
Less: Variable expenses: | ($54,000) | ($39,000) | ($10,000) | ($103,000) |
Budgeted Contribution margin | $81,000 | $52,000 | $20,000 | $153,000 |
Computation of variance | ||||
Actual Contribution margin (A) | $156,490 | |||
Budgeted Contribution margin (B) | $153,000 | |||
Contribution margin variance | $3,490 (F) |
Table (1)
Since, the actual contribution margin is more than the budgeted contribution margin; the contribution margin variance of $3,490 is favorable (F).
2.
Compute the contribution margin volume variance.
2.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Contribution margin volume variance: Contribution margin volume variance reflects difference between the actual quantity sold and the budgeted quantity sold multiplied by the budgeted average unit contribution margin. It is computed using the given formula:
Compute the contribution margin volume variance:
Therefore, the contribution margin volume variance is $0.
Working note 1: Calculate the budgeted average unit contribution margin:
3.
Compute the sales mix variance.
3.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Sales mix variance: The sales mix represents the part of total sales generated by each product. Sales mix variance is the summation of change in units for each product multiplied by the difference between the budgeted contribution margin and the budgeted average unit contribution margin. It is computed using the given formula:
Compute the model 1 mix:
Compute the model 2 mix:
Compute the model 3 mix:
Compute the sales mix variance:
Thus, the sales mix variance is $450 (Favorable).
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Chapter 18 Solutions
Cornerstones of Cost Management (Cornerstones Series)
- Sulert, Inc., produces and sells gel-filled ice packs. Sulerts performance report for April follows: Required: 1. Calculate the contribution margin variance and the contribution margin volume variance. 2. Calculate the market share variance and the market size variance. (CMA adapted)arrow_forwardThe Soda Shoppe manufactures and sells three soft drinks: Kola, Lima, and Oranga. Budgeted and actual results for 2022 are as follows: (Click the icon to view the budgeted data.) (Click the icon to view the actual data.) Required 1. Compute the total sales-volume variance, the total sales-mix variance, and the total sales-quantity variance. (Calculate all variances in terms of contribution margin.) Show results for each product in your computations. 2. What inferences can you draw from the variances computed in requirement 1? Requirement 1. Compute the total sales-volume variance, the total sales-mix variance, and the total sales-quantity variance. (Calculate all variances in terms of contribution margin.) Show results for each product in your computations. Begin by computing the actual contribution margins (CM). Then, compute the budgeted contribution margins in dollars for each product and in total for 2022. Actual CM Kola Lima Oranga Total Budgeted data Kola Lima Oranga Budget for…arrow_forwardOne subunit of Harris Sports Company had the following financial results last month: (Click the icon to view the financial results.) Read the requirements. Requirement 1. Complete the performance evaluation report for this subunit. Enter the variance percent as a percentage of the budgeted amount rounded to two places. (Enter a variance for each account as a positive number, and select whether the variance is favorable [F] or unfavorable [U]. For any zero varianc percentage rounded to two decimal places, X.XX%.) Data table Actual Flexible % Variance Flexible Budget Variance (F or U) Harris-Subunit X Results Budget (F or U) % Actual Flexible Budget Direct Materials % Variance (F or U) Results % Direct Labor Harris-Subunit X Direct Materials Flexible Budget Variance (F or U) 25,900 % Indirect Labor Direct Labor 13,800 Utilities Indirect Labor 23.100 D Depreciation Utilities 11,300 Repairs and Maintenance. Depreciation 25,000 5,600 Repairs and Maintenance 104,700 Total esc ? S S 28,000 $…arrow_forward
- 4arrow_forwardThis is continuation of problem 2. Sentra Inc. prepared the budget for the last quarter assuming a 25% market share based on total units sold for the industry. The actual sales for the industry for the last quarter turned out to be 515,000 unit. Required: Calculate the market share and market size variances for Sentra Inc for the last quarter. All variances need to be computed in terms of contribution marginsarrow_forwardOriole Company's actual results reveal that it was profitable in the sale of its star product: a high-end spot-cleaning vacuum for upholstery. But it was not nearly as profitable as management had hoped. Oriole's actual income statement and master budget income statement are as follows. In order to keep the focus on product costs, SG&A costs were omitted. Units sold Revenues Variable costs DM DL Variable-MOH Contribution margin Fixed-MOH Operating income DM DL Input Variable-MOH Actual Results Fixed-MOH 10,000 $1,670,000 560,500 216,000 Here are the company's standard cost cards for each product cost. 130,500 763,000 306,000 $457,000 Quantity Standards 3.0 yards 1.6 hours 1.6 hours. Flexible Budget 1.6 hours Price Standards $18.00 per yard $11.00 per hour $7.50 per hour $15.50 per hour Master Budget 12,000 $2,076,000 648,000 211,200 144,000 1,072,800 297,600 $775,200 Standard Cost per Unit $54.00 $17.60 $12.00 $24.80arrow_forward
- From the foregoing information, compute the following variances and indicate whether they are favorable (F) or unfavorable (U). State why each of the variances occurred. Material price variance and Material usage variance Direct labour rate variance and Direct labour efficiency variance Variable overhead spending variance and Variable overhead efficiency variancearrow_forwardOne subunit of Field Sports Company had the following financial results last month: E (Click the icon to view the financial results.) Read the requirements. Requirement 1. Complete the performance evaluation report for the subunit. (Enter a variance for each account as a positive number and select whether the variance is favorable or unfavorable. Enter the variance percent as a percentage rounded to two decimal places, X.XX%.) - X Actual Flexible Flexible Budget Requirements Subunit X Results Budget Variance (F or U) Net Sales Revenue $ 473,000 S 453.000 1. Complete the performance evaluation report for the subunit (round to two decimal places). 265,000 254,000 Variable Expenses Based on the data presented and your knowledge of the company, what type of responsibility center is this subunit? 3. Which items should be investigated if part of management's decision criteria is to investigate all variances equal to or exceeding $4,000 and exceeding 10% (both criteria must be met)?…arrow_forwardThe following information is available from the KANSAN CORP.: Actual factory O/H P15,000 Fixed O/H expenses, actual P7,200 Fixed O/H expenses, budgeted P7,000 Actual hours 3,500 Standard hours 3,800 Variable O/H rate per DLH P2.50 Assuming that Tyro uses a three-way analysis of O/H variances, what is the spending variance?arrow_forward
- Use the information provided below to calculate the following variances. In each case state whether the variance is favourable or unfavourable. 3.1 Material issue price variance 3.2 Material quantity variance 3.3 Total material variance, without using the answers from the previous questions. INFORMATION To produce one unit of Product Rap a standard quantity of 4 kilograms of material Y at a standard price of R5 per kilogram is allowed. Expected production per month is 8 500 units. The cost figures for September 2022 showed that 35 200 kilograms of material Y were purchased at R5.20 per kilogram. 8 000 units of Product Rap were produced during September 2022 using 33 600 kilograms of material Y.arrow_forwardThomson Manufacuting reports the following information at year end. Actual overhead applied RM257,000. Flexible budget based on standard hours RM309,000. Flexible budget based on actual hours RM293,000 What is the amount of the efficiency variance?arrow_forwardFranklin Manufacturing Company established the following standard price and cost data: Sales price $ 8.60 per unit Variable manufacturing cost $ 3.90 per unit Fixed manufacturing cost Fixed selling and administrative cost Franklin planned to produce and sell 2,300 units. Actual production and sales amounted to 2,400 units. Required a. Determine the sales and variable cost volume variances. b. Classify the variances as favorable or unfavorable, d. Determine the amount of fixed cost that will appear in the flexible budget. e. Determine the fixed cost per unit based on planned activity and the fixed cost per unit based on actual activity. Complete this question by entering your answers in the tabs below. $ 2,700 total $ 700 total Req A and B Reg D a. Determine the sales and variable cost volume variances. b. Classify the variances as favorable or unfavorable. Note: Select "None" if there is no effect (i.e., zero variance). Sales Variable manufacturing Reg E Volume Variancesarrow_forward
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