Acme Beds Inc. produces two models of beds, the Regular and the Majestic. Budgeted and actual data for the year for each model are as follows: Budget Actual Regular Majestic Regular Majestic Selling price per unit $ 300 $ 800 $ 325 $ 700 Variable cost per unit $ 220 $ 590 $ 238 $ 583 Sales volume in units 4,500 5,500 7,200 4,800 Master Budget Actual Sales revenue $ 5,750,000 $ 5,700,000 Variable costs 4,235,000 5,512,000 Contribution margin $ 1,515,000 $ 1,188,000 Fixed costs 882,500 919,500 Operating income $ 632,500 $ 268,500 Market data for the year: Expected total demand 500,000 beds Actual total demand 666,667 beds Required Calculate the sales quantity variance in total. Calculate the market share variance for Acme Beds. Calculate the market size variance for Acme beds. What do you consider the most important reason why actual operating income was less than budgeted operating income for the year? Explain your reasoning.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Acme Beds Inc. produces two models of beds, the Regular and the Majestic. Budgeted and actual data for the year for each model are as follows:
Budget Actual
Regular Majestic Regular Majestic
Selling price per unit $ 300 $ 800 $ 325 $ 700
Variable cost per unit $ 220 $ 590 $ 238 $ 583
Sales volume in units 4,500 5,500 7,200 4,800
Sales revenue $ 5,750,000 $ 5,700,000
Variable costs 4,235,000 5,512,000
Contribution margin $ 1,515,000 $ 1,188,000
Fixed costs 882,500 919,500
Operating income $ 632,500 $ 268,500
Market data for the year:
Expected total demand 500,000 beds
Actual total demand 666,667 beds
Required
Calculate the sales quantity variance in total.
Calculate the market share variance for Acme Beds.
Calculate the market size variance for Acme beds.
What do you consider the most important reason why actual operating income was less than budgeted operating income for the year? Explain your reasoning.
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