Question

Robinson Company has two products, A and B. Robinson’s budget for August follows:

	Master Budget
	Product A				Product B
Sales	$	264,000			$	396,000
Variable cost		154,000				264,000
Contribution margin	$	110,000			$	132,000
Fixed cost		88,000				66,000
Operating income	$	22,000			$	66,000
Selling price	$	120			$	60

On September 1, these operating results for August were reported:

	Operating Results
	Product A				Product B
Sales	$	198,000			$	446,400
Variable cost		117,000				309,600
Contribution margin	$	81,000			$	136,800
Fixed cost		88,000				66,000
Operating income	$	(7,000	)		$	70,800
Units sold		1,800				7,200

Required:

1. For each product, determine the following variances measured in dollars of contribution margin:

1. Flex budget variance

2. sales volume variance

3. sALES QUANITY

4. Sales mix variance

Answer 1

Answer-1
Flexible Budget variance for Product A
	Actual	Flexible budget	Variances	F/(U)
Sales	$   1,98,000	$        2,16,000	$      -18,000	(U)
Variable Cost	$   1,17,000	$        1,26,000	$          9,000	F
Contribution margin	$       81,000	$           90,000	$         -9,000	(U)
Fixed Cost	$       88,000	$           88,000	$                 -
Operating Income	$       -7,000	$              2,000	$         -9,000	(U)
Flexible Budget variance for Product B
	Actual	Flexible budget	Variances	F/(U)
Sales	$   4,46,000	$        4,32,000	$        14,000	F
Variable Cost	$   3,09,600	$        2,88,000	$      -21,600	(U)
Contribution margin	$   1,36,400	$        1,44,000	$         -7,600	(U)
Fixed Cost	$       66,000	$           66,000	$                 -
Operating Income	$       70,400	$           78,000	$         -7,600	(U)
Answer-2
Sales Volume Variance = (Actual Units sold- Budgeted Units Sold)*Std Contribution p.u
	Product A	Product B
Actual Sales	1800	7200
Budgeted Sales units	2200	6600
Difference	-400	600
Std Contribution p.u	$              50	$                   20
Sales Volume variance	$     -20,000	$           12,000
Total Sales Volume Variance is - $ 8,000 (U)
Answer -3
Standard Mix ratio
25% product A
75% Product B
Total Sales during the period
1800 of product A
7200 of Product B
Unit Sales at Standard Mix
Product A =25% 9000 units = 2250 units
Product B =75% of 9000 units =6750 units
Difference between Actual Sales Quantity and sales quantity in Std mix is-
	Product A	Product B
Budgeted Sales Quantity	2200	6600
Unit Sales in Std mix	2250	6750
Difference	50 (F)	150(F)
Std Contribution p.u	$              50	$                   20
Variance	2500(F)	3000(F)
Total Sales Quantity variance 5500 (f)
Answer 4
Sales Mix Variance = (Actual units sold-unit Sales at Std mix )* Std. contribution per unit
	Product A	Product B
Actual Sales Quantity	1800	7200
Unit Sales in Std mix	2250	6750
Difference	450 (U)	450 (F)
Std Contribution p.u	$              50	$                   20
Variance	22500(U)	9000(F)
Total Sales Mix variance 13500 (U)