Comparative Income Statements and Sales Performance Variances; Current to Prior Year Clippers Inc. (CI) manufactures two types of garden clippers, a light duty model called the “half-inch” which is intended for clipping branches and stems up to one-half inch thick. The “one-inch” model is designed for heavier stems and branches. To boost sales, CI decided at the beginning of 2010 to reduce the price of the half-inch model to better position its price relative to some key competitors. On the other hand, CI felt that the one-inch model was technically superior to competitors’ models and decided that a small price increase was appropriate. The data for the current and prior year are as follows:
| 2010 | 2009 |
Sales units | 7,200 | 6,500 |
Sales mix for each product |
|
|
Half-inch model | 50% | 30% |
One-inch model | 50% | 70% |
Price |
|
|
Half-inch model | $ 12.00 | $ 14.00 |
One-inch model | $ 36.00 | $ 32.00 |
Variable cost per unit |
|
|
Half-inch model | $ 6.00 | $ 6.00 |
One-inch model | $ 8.00 | $ 8.00 |
Fixed cost | $35,000 | $35,000 |
Required
1. Calculate a comparative contribution income statement for CI for 2010 that shows the volume and selling price variances for each product based on contribution margin. (Hint: Use Exhibit 16.15 as an example)
2. Determine the sales mix variance and the sales quantity variance for each product, based on contribution margin.
3. Did the price change have the expected results? Why or why not?
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