3 The types of ihiomauo a (Hint: You may need to review Chapter 8.) 11.43 LO11.1
ID: 2510153 • Letter: 3
Question
3 The types of ihiomauo a (Hint: You may need to review Chapter 8.) 11.43 LO11.11 (appendix) Analysing sales performance using variances: manufacturer Quill Pen Company manufactures two lines of pens: Super and Executive. Budgeted and actual contribution margin statements follow Quill Pen Company Budget and Actual Contribution Statements for the year ended 31 December (in 'ooos) Actual Executive 130 $1235 Budget SuperExecutive Total Total 260 $2015 450 750 1200 390975 1365 $ 260 650 Super 130 $780 100 Unit sales Sales revenue Variable expenses Contribution margin Fixed expenses: Manufacturing Marketing Administration 150 $900 $1000 $1900 $390 $450 250 $ 700 $200 153 95 $448 $252 $190 140 90 $420 $230 Total fixed expenses Profit before taxes Required: 1 The budgeted total volume of 250 000 units was based on the company achieving a market share of 2 Calculate the variance of actual contribution margin from budgeted contribution margin attributable 3 Calculate the variance of actual contribution margin from budgeted contribution margin attributable 20 per cent. Actual industry volume reached 1 290 o00 units. Calculate the portion of Quill's increased volume resulting from improved market share. to the sales price. Indicate whether the variance is favourable or unfavourable. (Hint: Add the sales price variances calculated for each product line.) to unit variable cost changes. For each product, indicate whether the variance is favourable or unfavourable Provide a reconciliation that explains the source of differences between actual contribution margin and budgeted contribution margin. (Hint: List variances that explain the difference.) 4Explanation / Answer
1. Increased volume resulting from improved market share
Actual industry volume = 1290000 units
Quill's portion in industry volume @20% = 1290000*20% = 258000 units
Budgeted total volume = 250000 units
Increased volume in Quill's portion resulting from improved market share = 258000-250000= 8000 units
2. Contribution Margin variance attributable to the sale price
Sale price variance = Actual Sales Quantity*Actual price - Actual Sales Quantity*Budgeted price
(in '000s)
Contribution Margin variance = 65 unfavourable
3. Contribution Margin variance attributable to unit variable cost change
Unit Variable Cost variance = (Actual unit- Budgeted unit) * Budgeted unit variable cost
(in'000's)
Contribution Margin Variance = 60 (U)+ 225 (F) = 165 Favourable
Note 1 Sale Volume Variance = (Actual Sales Volume- Budgeted Sales Volume)*Budgeted price
(in '000s)
Particulars Super Executive Actual Sales Quantity (A) 130 130 Actual Price (B) 780/130 = 6 1235/130 = 9.5 Budgeted price (C) 900/150 = 6 1000/100= 10 Sale price variance (A*B-A*C) 0 65 (U)Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.