D&B Ice Cream budgeted sales of 136,096 units of flavor C, assuming that the company would have 16 percent of 850,600 units sold in a particular market. The actual results were 126,210 units, based on a 14 percent share of a total market of 901,500 units. The budgeted contribution margin is $5.70 per unit.
Required:
Compute the sales activity variance, and break it down into market share variance and the industry volume variance. (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. Enter your answers rounded to the nearest whole dollar.)
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Answer -
Calculation of Sales activity variance, Market share variance and Industry volume variance
| Calculation | Amount | Favorable (F) / Unfavorable (U) | ||
| 1. | Sales activity variance |
= (Actual units sold - Budgeted units sold) * Budgeted contribution margin per unit = (126210 units - 136096 units) * $5.70 per unit. = $56350 |
$56350 | U |
| 2. | Market share variance |
= (Actual units sold * Standard contribution margin per unit) - (Standard units sold * Standard contribution margin per unit) = (126210 units * $5.70 per unit) - (901500 units * 16% * $5.70 per unit) = $719397 - $822168 = $102771 |
$102771 | U |
| 3. | Industry volume variance |
= (Standard units sold * Standard contribution margin per unit) - (Budgeted units sold * Standard contribution margin per unit) = (901500 units * 16% * $5.70 per unit) - (136096 units * $5.70 per unit) = $822168 - $775747 = $46421 |
$46421 | F |
D&B Ice Cream budgeted sales of 136,096 units of flavor C, assuming that the company would...