Answer:-
Budgeted sales quantity (BQ):
Model A 1,400 units
Model B 1,800 units
Actual sales quantity (AQ):
Model A 1,200 units
Model B 2,400 units
Revised actual sales quantity (RAQ):
Model A = 1,400/(1,400 + 1,800) × (1,200 + 2,400) = 1,575
Model B = 1,800/(1,400 + 1,800) × (1,200 + 2,400) = 2,025
Budgeted margin (BM):
Model A $2,000 per vehicle
Model B $3,000 per vehicle
Model | AQ × BM | RAQ × BM |
A | 1,200 × $2,000 | 1,575 × $2,000 |
B | 2,400 × $3,000 | 2,025 × $3,000 |
Total | $ 9,600,000 | $ 9,225,000 |
Sales mix variance = (RAQ × BM) - (AQ × BM)
= $9,225,000 - $9,600,000 = 375,000 Adverse
Predicted sales mix = $9,225,000
Actual sales mix = $9,600,000
Analysis: It can be seen that there is an adverse of 375,000 which has arisen due increase in mix of model B which is also having higher margin than model A. This will increase income.
Consider an example of a new car sale yard and the managers predicted that they would sell 1,400 of model A and 1,800 o...