Comparative Income Statements and Sales Performance Variances; Current to Prior Year Clipp...

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” 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 the current year 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:

Required

1. Calculate a comparative contribution income statement for CI for the current year that shows the volume and selling price variances for each product based on contribution margin. (Hint: Use Exhibit 16.15 as an example.)

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2. Determine the sales mix variance and the sales quantity variance for each product, based on contribution margin.

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3. Did the price change have the expected results? Why or why not?

EXHIBIT 16.15 Selling Price and Volume Variances for January 2017