Question

Calculate the sales mix variance, the sales quantity variance and the sales volume variance for each product and in total for the month of December 2019.

BCF forecasts a 25% market share of total 1kg blocks of chocolate sold in Otago in December 2019 in Springfield. Reliable industry sources indicate that the total number of 1kg blocks of chocolate sold for December 2019 in Otago was 12.5% higher than budgeted. Exhibit 1 Budgeted and actual data for December 2019 Budgeted Data Actual Data Mint Rich Dark Chill Cranberry Vintage Mint Chill Cranberry Vintage Rich Dark 1kg Blocks 7,200 4,800 4,000 10,800 3,600 7,200 Contribution Margin $18,000 $19,200 $20,000 $21,600 $10,800 $54,000

Answer 1

Answer :

(a) Sales Mix Varaince = Budgeted Margin ( Actual Quantity - Revised actual Quantity)

Rich Dark = $ 2.50 ( 10800 - 9720 ) = $ 2700 F

Mint Chill = $ 4 ( 3600 - 6480 ) = $ 11520 U

Cranberry Vintage = $ 5 ( 7200 - 5400 ) = $ 9000 F

Total Sales Mix variance = $ 2700 F + $ 11520 U + $ 9000 F = $ 180 F

Working note -1

Computation of Revised actual quantity

	Budgeted Quantity	Actual Quantity	Revised Actual Quantity ( Actual quantity in Budgeted M)ix
Rich Dark	7200	10800	9720
Mint chill	4800	3600	6480
Cranberray Vintage	4000	7200	5400
Total	16000	21600	21600

F = Favorable

U = Unfavorable

(b) Sales Quantity variance = Budgeted Margin ( Revised Actual Quantity - Budgeted Quantity )

Rich Dark = $ 2.50 ( 9720 - 7200 ) = $ 6300 F

Mint Chill = $ 4 ( 6480 - 4800 ) = $ 6720 F

Cranberry Vintage = $ 5 ( 5400 - 4000) = $ 7000 F

Total Sales Quantity variance = $ 6300 F + $ 6720 F + $ 7000 F = 20020 F

(c) Sales volume variance = Budgeted margin ( Actual Quantity - Budgeted quantity )

Rich Dark = $ 2.50 ( 10800 - 7200 ) = $ 9000 F

Mint Chill = $ 4 ( 3600 - 4800 ) = $ 4800 U

Cranberry Vintage = $ 5 ( 7200- 4000) = $ 16000 F

Total Sales Volume  variance = $ 9000 F + $ 4800 U + $ 16000 F = $ 20200 F