The next year\'s budget for Green, Inc., a multi-product company, is given below

Question

The next year's budget for Green, Inc., a multi-product company, is given below:

At the end of the year, the total fixed costs and the variable costs per unit were exactly as budgeted, but the following units per product line were sold. Green analyzes the effects its sales variances have on the profitability of the company.

What is the total sales mix variance?

Product A Product B   Sales $ 1,960,000 $ 1,548,750   Variable costs 940,800 594,300   Fixed costs 700,000 700,000   Net income 319,200 254,450   Units 245,000 105,000

Explanation / Answer

Sales Mix Variance = (Actual unit sales - Budgeted unit sales) x Budgeted contribution margin Calculation of Sales Mix Variance Product A Product B Sales Price per unit 8.00 14.75 ($1960000 / 245000) ($1548750 / 105000) Less: Variable Cost 3.84 5.66 ($940800 / 245000) ($594300 / 105000) Contribution Per Unit 4.16 9.09 Budgeted Sales 245000 105000 Actual Sales 246330 110670 Sales Mix Variance 5532.80 51540.30 Total sales Mix Variance = 5532.80 + 51540.30 = $57073.10 (Favourable)

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