The Chair company manufactures two modular types of chairs, one for the resident

Question

The Chair company manufactures two modular types of chairs, one for the residential market, and the other for the office market. Budgeted and actual operating data for the year 2015 are:

a. Compute the total static budget variance, the total flexible-budget variance and the total sales-volume variance.

b. Compute the sales-mix variance and the sales-quantity variance.

Static Budget Residential Office Total Number of Chairs 260 140 400 Contribution margin $26,000 $11,200 $37,200 Actual Results Residential Office Total Number of Chairs 252 168 420 Contribution Margin $22,356 $13,248 $35,604

Explanation / Answer

a. Total static budget variance = 37200 - 35604 = $1596

Total flexible budget variance = [(37200/400) × 420] - 35604= $3456

Total sales volume variance = (420-400) × (37200/400) = $1860

b.

Sales mix % for static budget = 65% for residential + 35% for office.

Sales mix % for actual = 60% for residential + 40% for office.

Sales-mix variance for residential = 420 × ( 60% - 65%) × 26000 ÷ 260 = 420 × (-5%) × 100 = $2100 U

Sales-mix variance for office = 420 × (40% - 35%) × 11200÷140 = 420 ×(5%) × 80 = 1680 F

Sales quantity variance for residential = ( 252 - 260) × 100 = 800U

Sales quantity variance for office = (168 - 140) × 80 = 2240 F.

Please provide feedback.

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