Question

Coco has an exclusive contract with Mex exporters. Two brands of chocolates are imported, (MT) and (ET). The following data are provided for the current fiscal year:

	Budgeted		Operating Results
	MT	ET	MT	ET
Price per pound	60	80	40	46
Variable cost per pound	20	34	20	36
Sales (in pounds)	4,200	4,200	4,160	4,950

The total market was estimated to be 82,000 pounds at the time of budget. The actual total market for the year is 77,000 pounds. What is the total contribution margin sales volume variance?

$16,340 favorable.

$16,740 unfavorable.

$24,340 favorable.

$25,300 unfavorable.

$32,900 favorable.

2.

			Budgeted	Operating Results
	MT	ET	MT	ET
Price per pound	40	80	40	46
Variable cost per pound	20	30	20	45
Sales (in pounds)	4,000	4,000	3,960	5,040

The total market was estimated to be 80,000 pounds at the time of budget. The actual total market for the year is 75,000 pounds. What is the firm's market size variance? (Round your intermediate percentage answers to nearest whole percent.)

$16,700 unfavorable.

$17,500 unfavorable.

$18,740 unfavorable.

$19,700 unfavorable.

$28,500 unfavorable.

Answer 1

(1) Total contribution margin sales volume variance:-

(Actual Units sold – Budgeted Units sold) * Budgeted Contribution per unit

MT:-

Actual Units sold = 4160

Budgeted Units sold = 4200

Budgeted Contribution per unit = $60 - $20 = $40

(4160 – 4200) * $40 = $1600 (U)

ET:-

Actual Units sold = 4950

Budgeted Units sold = 4200

Budgeted Contribution per unit = $80 - $34 = $46

(4950 - 4200) * $46 = $34500 (F)

Total Variance = $1600 (U) + $34500 (F) = $32900 Favourable

(2) Market size variance:-

(Actual Market Size – Budgeted Market size) * Budgeted Market share * Budgeted Average contribution margin per unit

Actual Market Size = 75000

Budgeted Market size =80000

Budgeted Market share = Budgeted Units sold/ Budgeted Market size

               = (4000 + 4000)/80000 = 10%

Budgeted Average contribution margin per unit = [(Budgeted contribution for MT per unit * Budgeted Units sold) + (Budgeted contribution for ET per unit * Budgeted Units sold)]/Total Budgeted Units sold

[($20 * 4000) + ($50 * 4000)/8000]

= $35

Variance = (75000 – 80000) * 10% * $35 = $17500 Unfavourable