Answered: The Chair Company manufactures two…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter19: Support Department And Joint Cost Allocation

Section: Chapter Questions

Problem 2CMA: Adam Corporation manufactures computer tables and has the following budgeted indirect manufacturing...

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WHAT IS THE ANSWER OF THE 3?

The Chair Company manufactures two modular types of chairs: one for the residential market, and the other for the office market. Budgeted and actual operating data for the year 2012 are:

Static Budget Residential Office Total

Number of chairs sold 260,000 140,000 400,000

Contribution margin $26,000,000 $11,200,000 $37,200,000

Actual Results Residential Office Total

Number of chairs sold 248,400 165,600 414,000

Contribution margin $22,356,000 $13,248,000 $35,604,000

Required:

Compute the following variances in terms of contribution margin:

a. Compute the total static-budget variance, the total flexible-budget variance, and the total sales-volume variance.

b. Compute the sale-mix variance and the sales-quantity variance by type of chair, and in total.

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

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