Peninsula Candy Company makes three types of candy bars: Chewy, Chunky, and Choc

Question

Peninsula Candy Company makes three types of candy bars: Chewy, Chunky, and Choco-Lite (Lite). Sales volume for the annual budget is determined by estimating the total market volume for candy bars and then applying the company's prior year market share, adjusted for planned changes due to company programs for the coming year. Volume is apportioned among the three bars based on the prior year's product mix, again adjusted for planned changes for the coming year The following are the company budget and the results of operations for July. Budget Sales-units (in thousands) Sales-dollars (in thousands) Variable costs Chewy 2,000 bars $200 140 $ 60 36 $ 24 Chunky 2,000 bars $480 400 S 80 34 $ 46 Choco-Lite 4,000 bars $880 740 $140 56 $ 84 Total 8,000 bars Contribution margin Manufacturing fixed cost Product margin Marketing and administrative costs (all fixed) $1,560 1,280 $ 280 126 $ 154 57 $ 97 Operating profit Actual Sales-units (in thousands) Sales-dollars (in thousands) Variable costs 7,800 bars 1,600 bars $112 70 $ 42 40 2,000 bars $480 424 S 56 40 4,200 bars $880 716 $164 58 $106 $1,472 1.210 $ 262 138 $ 124 Contribution margin Manufacturing fixed cost Product margin Marketing and administrative costs (all fixed) Operating profit $111 Industry volume was estimated at 87.0 million bars for budgeting purposes. Actual industry volume for July was 79.2 million bars

Explanation / Answer

Formula: Sales Variance = Actual Sales - Budget Sales (Actual Price*Actual Quantity)-(Budget Price*Budget Quantity) Product Budget Actual Quantity Price($)/unit Quantity Price($)/unit Chewy 2000 0.1 1600 0.07 Chunky 2000 0.24 2000 0.24 Choco-lite 4000 0.22 4200 0.21 Product BP AP BQ AQ (BP*BQ) (BP*AQ) (AP*AQ) RAQ Chewy 0.1 0.07 2000 1600 200 160 112 1950 Chunky 0.24 0.24 2000 2000 480 480 480 1950 Choco-lite 0.22 0.21 4000 4200 880 924 880 3900 Total 8000 7800 1560 1564 1472 7800 Notes: BQ = Budgeted Sales Quantity AQ = Actual Sales Quantity 0.091954 RAQ = Revised Actual Sales Quantity           = Actual Qty Sold rewritten in budgeted Proportion BP = Budgeted Selling Price per Unit AP = Actual Selling Price per unit Calculation of Sales Variance: Particulars Chewy Chunky Choco-lite Total Sales Variance = (AP*AQ-BP*BQ) -88 0 0 88 (U) Sales Price Variance = AQ*(AP-BP) -48 0 -44 92(U) Sales Volume Variance = BP*(AQ-BQ) -40 0 44 4 (F) Sales Mix Variance = BP*(AQ-RAQ) -35 12 66 43(F) Sales Quantity Variance = BP*(RAQ-BQ) -5 -12 -22 39(A) Market Size Variance = Budget Market Share(%)*(Actual Industry Sales - Budget Industry Sales)*Budget Average Price/unit Budgeted Average Price/unit = 0.195 (Total Budgeted Sales/Budgeted Sales Volume) Budgeted Market share 0.09 Market Size variance -139.862 ($ in thousands) Market Share Variance = (Actual Market share - Budget Market Share)*Actual Industry sales*Budget Average Price/unit Actual Market Share 0.098485 (Actual Sales of 3 products/Actual Industry Sales) 79200000 79200 Market share Variance 100.8621 ($ in thousands) Sales Quantity Variance = Market Size variance + Market Share Variance

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