Question

Problem 17-49 (Algo) Revenue Analysis Using Industry Data and Multiple Product Lines (LO 17-4)

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	Chewy						Chunky						Choco-Lite						Total
Sales-units (in thousands)	2,000 bars						2,000 bars						4,000 bars						8,000 bars
Sales-dollars (in thousands)		$	220					$	360					$	880					$	1,460
Variable costs			160						280						720						1,160
Contribution margin		$	60					$	80					$	160					$	300
Manufacturing fixed cost			40						40						60						140
Product margin		$	20					$	40					$	100					$	160
Marketing and administrative costs (all fixed)																					55
Operating profit																				$	105
Actual	Chewy					Chunky							Choco-Lite						Total
Sales-units (in thousands)	1,500 bars						2,000 bars						4,100 bars						7,600 bars
Sales-dollars (in thousands)		$	105					$	360					$	880					$	1,345
Variable costs			60						304						753						1,117
Contribution margin		$	45					$	56					$	127					$	228
Manufacturing fixed cost			38						35						55						128
Product margin		$	7					$	21					$	72					$	100
Marketing and administrative costs (all fixed)																					47
Operating profit																				$	53

Industry volume was estimated at 95.5 million bars for budgeting purposes. Actual industry volume for July was 85.950 million bars.

Required:

a. Determine the sales price and sales activity variances.

b. Break down the sales activity variance into the parts caused by industry volume and market share.

Answer 1

Answers Page No 0 @ sales price variance (en dhousand) Sales price variance = Alial sales volume -- Actual sales at bodgeted price - 1945 – from + scox + 4100 x 6000 = 1345 -- [165 + 360 + 900) = 1345 - 1427 =#820 1.: sales price variance' = $820 Sales activity variance (s thewand) Sales activity variasse - Actual sales at budgeted price -- Bodigel Volume 1460 = 1427 - = $330 :: sales activity variance's $33 U

Page No ③ 850150 m Deviation of actrical from estimate - industry - 95.5 million = 90% Industry share variance = Sales activity variance x 90% = $33 x 900% = $29.90 - Industry share variance = $29.70 = 294000 Market share variance = " 33 - 2914 = $3.30 ::. Market share variance = $3.30 = $33000