Question

NEW YORK CORPORATION .....produces three models of Widget: Alpha, Beta and Gamma. Analysis has revealed that the total contribution margin came in lower than budgeted. As controller, they are looking to YOU for answers as to why the actual results are different than those on the budget. The fol lowing budgeted and actual information is available: Budgeted data Sales Volume Selling Variable Cost Contribution per Unit Margin per Unit Price in Units $374 $ 185 $ Alpha 189 13,580 units 96 35,890 Beta 272 176 78 Gamma 144 66 47,530 97,000 units Actual data Variable Cost Selling Contribution Sales Volume Margin per Unit in Units Price per Unit $365 $ 75 $ Alpha 190 10,120 288 94 32,200 Beta 194 Gamma 110 75 35 49,680 92,000 units Required: Note: Where appropriate, calcu late all variances below in terms of SALES PRICE! Calculate the actual and budgeted sales mixes for the three products for the period. 1. Compute the total sales budget variance for the period. 2. Further analyze the variance computed in #3 by breaking it into the sales-price variance and sales volume 3. variance. Break down the sales volume variance in #4 above by computing the sales-mix and sales-quantity variances 4. Write a paragraph or two comparing and explaining the differences between the budgeted and actual sales performance. 5.

Answer 1

Answer is given below

1 Budgeted Sales Quantity Alpha Beta Gamma Budgeted Sales 13,580 35,890 47,530 97,000 Selling Price $374 $272 $144 Budgeted Sales $5,078,920 $9,762,080 $6,844,320 $21,685,320 Actual Sales Quantity Alpha Beta Gamma Actual Sales 10,120 32,200 49,680 92,000 Selling Price $365 $288 $110 Budgeted Sales $3,693,800 $9,273,600 $5,464,800 $18,432,200 2 Total Sales Budgeted Variance (Budgeted Sales - Actual Sales) Budgeted Sales Actual Sales Variance $21,685,320 $18,432,200 $3,253,120 Unfavourable 3 Sales price variance (Budgeted Sale price- Actual sale price )* Actual Quantity Budgeted Variance SP Alpha Beta $374 $272 $144 Actual SP $365 $288 $110 Actual Quantity 10,120 32,200 49,680 $91,080 Unfavourable $515,200 Favourable $1,689,120 Unfavourable $1,265,000 Unfavourable Gamma Variance Sales volume variance (Budgeted volume - Actual volume) * Budgeted Selling price Budgeted Actual Budgeted Volume Volume Selling price Alpha 13,580 10,120 $374 Beta 35,890 32,200 $272 Gamma 47,530 49,680 $144 $1,294,040 Unfavourable $1,003,680 Unfavourable -$309,600 Favourable $1,988,120 Unfavourable Sales mix variance (Standard mix for actual sales - Actual mix) * Budgeted Selling price Variance Standard Mix 12,880 34,040 45,080 Alpha Beta Gamma Actual Volume 10,120 32,200 49,680 Budgeted Selling price $374 $272 $144 $1,032,240 Unfavourable $500,480 Unfavourable $662,400 Favourable $870,320 Unfavourable Standard mix Alpha Standard mix 14% Beta Units 13,580 35,890 47,530 97,000 37% 49% Gamma Units Sales Quantity variance (Budgeted Sales-Actual Sales) * Budgeted weight average selling price (97,000-92,000) * $223.56 $1,117,800 Unfavourable Budgeted sales Budgeted quantity Weighted avg SPL $21,685,320 97,000 $223.56 Difference between Budgeted and Actual sales Overall level Actual sales has been less than Budgeted Sales The variance is unfavourable. Both price and Quantity variance has been unfavourable for Alpha and Beta. Only Gamma is favourable on Price and Quantity variance Sales mix variance has been unfavourable for Alpha and Beta Sales Quantity variance is also unfavourable