Sulert, Inc., produces and sells gel-filled ice packs. Sulert’s performance repo

Question

Sulert, Inc., produces and sells gel-filled ice packs. Sulert’s performance report for April follows:

Actual: units sold 290,000, sales $1,450,000, variable costs 652,500, contribution margin $797,500, market size in units 1,250,000

Budgeted: units sold 300,000; sales $1,515,000, variable costs 636,300, contribution margin $878,700, market size in units 1,200,000

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)

Explanation / Answer

Contribution margin variance = Actual contribution margin - Budgeted Contribution margin
= $797,500 - $878,700
= $81,200 U

Contribution margin volume variance = Standard Margin* - Budgeted Margin
= ($878,700 / 300000* 290000 ) - $878,700
= $849,410 - $878,700
= $29290 U

*Standard Margin = Budgeted margin * Actual Units

Market Size variance = Budgeted market share % * (Actual sales units - Budgeted sales units) * Average budgeted margin per unit
= (300000/1200000 * 100) * (290000 units - 300000 units) * ($878,700 / 300000)
= 25% * 10000 units* $2.929
= $7322.5 U

Market Share variance = [Actual market share % - Budgeted market share %] * Actual sales units * Average budgeted margin per unit
= [ (290000/1250000 * 100) - (300000/1200000 * 100)] * 290000 * $2.929
= [ 23.2% - 25%] * 290000 * $2.929
= 1.8% * 290000 * $2.929
= $15289.38 U

Market share % = Actual or Budgeted Units sold / Actual or budgeted market size *100

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