Question

3. The Tempest Company has the following information for the current year.

	Actual	Budget
Sales Units
Product X	22,000	20,000
Product Y	33,000	30,000
Total	55,000	50,000
Sales Mix for each Product
Product X	40.0%	40.0%
Product Y	60.0%	60.0%
Price
Product X	$22.00	$20.00
Product Y	$35.00	$30.00
Variable Cost per Unit
Product X	$15.00	$14.00
Product Y	$16.00	$18.00

The industry budget is 2 million units and the actual result for the industry is 2.5 million units.

Required:

1. Compute the contribution margin sales mix variance for product X.
2. Compute the contribution margin sales mix variance for product Y.
3. Compute the contribution margin sales volume variance for product X.
4. Compute the contribution margin sales volume variance for product Y.
5. Compute the contribution margin sales quantity variance for product X.
6. Compute the contribution margin sales quantity variance for product Y.
7. Compute the market share variance for Tempest.
8. Computer the market size variance for Tempest.

Answer 1

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Given in Question Actual Budget Particulars Sales Units Product X Product Y Total 22,000.00 33,000.00 55,000.00 AQ = Actual Quantity BM = Budgeted Margin i.e. Budgeted Selling price - Budgeted Variabe cost 20,000.00 RAQ = Revised actual quantity = actual production allocated on budgeted sales mix 30,000.00 50,000.00 Sales Mix for each product Product X Product Y 40% 60% 40% 60% Price Product x Product Y $ 22 $ 35 $ 20 $ 30 Variable cost per unit Product x Product Y | $15 $ 161 $14 $ 18 Industry Budget Actual units of industry 2000000 Units 2500000 Units

(AQ BM RAQ 22,000.00 22,000.00 Contribution margin sales mix variance for product X Given $6 ($20-$14) No Variance (55000*40%) Ans-1 (AQ*BM) - (RAQ*BM) = (22000*6) - (22000*6) AQ BM RAQ 33,000.00 33,000.00 Contribution margin sales mix variance for product Y Given $ 12 ($30-$18) No Variance (55000*60%) Ans-2 (AQ*BM) - (RAQ*BM) = (33000*6) - (22000*6)

BM 22,000.00 20,000.00 Contribution margin sales volume variance for product X Given BO $6 ($20-$14) Given Favourable 12000.00 (22000*6) - (20000*6) Ans-3 (AQ*BM) - (BQ*BM) = AQ BM BQ 33,000.00 30,000.00 Contribution margin sales volume variance for product Y Given $ 12 ($30-$18) Favourable Given Ans-4 (AQ*BM) - (BQ*BM) = 36000.00 (33000*12) - (30000*12)

BM RAQ 22,000.00 L (55000*40%) 20,000.00 Contribution margin sales Quantity variance for product X BQ $6 ($20-$14) Given Favourable 12000.00 (22000*6) - (20000*6) Ans-5 (RAQ*BM) - (BQ*BM) = BM RAQ 33,000.00 (55000*60%) 3 0,000.00 Contribution margin sales Quantity variance for product Y BQ $ 12 ($30-$18) Given Favourable 36000.00 (22000*6) - (20000*6) Ans-6 (RAQ*BM) - (BQ*BM) =

2.20 Ans-7 Actual Market Share% Budgted Market share% Actual Industry sales quantity Avg Budgeted margin per unit Market Share Variance for TEMPEST 2.50 25,00,000.00 $ 9.60 |(55000/2500000*100) (50000/2000000*100) Given ($6*40%)+($12*60%) [(Actual Market Share % - Budgeted Unfvaourable Market Share %) * (Actual Industry sales -72000.00 quantity in units) * (Average Budgeted (2.2-2.5)%*25,00,000*9.6 margin per unit) Market Size Variance for TEMPEST Budgted Market share Actual Industry sales qua Budgeted Industry sales quanti Avg Budgeted margin per unit 2.50 25,00,000.00 20,00,000.00 $ 9.60 (50000/2000000*100) Given Given ($6*40%)+($12*60%) Unfvaourable 120000.00 2.5%* (25,00,000-20,00,000)*9.60 [(Budgeted Market Share %) * (Actual Industry sales quantity in units- Budgeted sales quantity in units) * (Average Budgeted margin per unit) Ans-8