Exercise 17-26 Sales Mix and Quantity Variances (LO 17-3) Chow-4-Hounds (C4H) ma

Question

Exercise 17-26 Sales Mix and Quantity Variances (LO 17-3) Chow-4-Hounds (C4H) makes pet food for sale in supermarkets. C4H produces two general types: Branded and Generic. The two differ primarily in the ingredients used. At budget, Branded sells for $14 per case and has a variable cost to produce of $7 per case. Generic sells for a budgeted $11 per case and has a budgeted variable cost to produce of $6 per case. C4H expects to sell 20 percent Branded and 80 percent Generic regardless of the sales volume. C4H budgeted total sales of 202,000 cases for March. Actual case volume sold in March was 214,000 cases, of which 61,000 were Branded. Total actual revenues in March were $2,057,000, of which $781,000 were from sales of Branded cases. Required: a. Compute the activity variance for C4H for March. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) b. Compute the mix and quantity variances for March. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

Explanation / Answer

Ans 1 Activity varaince 1192000-1090800 $101,200 F Branded Generic sales price $14 $11 Less variable cost $7 $6 Contribution margin $7 $5 Budgeted sales 40400 161600 (202000*20%*) (202000*80%*) Contribution margin $7 $5 Total $282,800 $808,000 $1,090,800 Actual sales 61000 153000 Contribution margin $7 $5 Total $427,000 $765,000 $1,192,000 ans 2 Sales Mix variance ($36,400) working Flexible sales 42800 171200 Actual sales 61000 153000 Difference -18200 18200 Unf F Variance Flexible sales-actual sales -18200 18200 Std Contribution margin $7 $5 Varaince ($127,400) $91,000 ($36,400) ans Sales quantity varaince $64,800 F Budgeted sales 40400 161600 Flexible sales 42800 171200 (214000*20%) (214000*80%) Difference 2400 9600 F Std Contribution margin $7 $5 Amt $16,800 $48,000 $64,800 F

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