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Haysbert Company provides management services for apartments and rental units. In general, Haysbert packages its services into two groups: basic and complete. The basic package includes advertising vacant units, showing potential renters through them, and collecting monthly rent and remitting it to the owner. The complete package adds maintenance of units and bookkeeping to the basic package. Packages are priced on a per-rental unit basis. Actual results from last year are as follows: Haysbert had budgeted the following amounts: Required: 1. Calculate the contribution margin variance. 2. Calculate the contribution margin volume variance. 3. Calculate the sales mix variance.
Cornerstones of Cost Management (C...
Solutions
Cornerstones of Cost Management (C...
Haysbert Company provides management services for apartments and rental units. In general, Haysbert packages its services into two groups: basic and complete. The basic package includes advertising vacant units, showing potential renters through them, and collecting monthly rent and remitting it to the owner. The complete package adds maintenance of units and bookkeeping to the basic package. Packages are priced on a per-rental unit basis. Actual results from last year are as follows:
Haysbert had budgeted the following amounts:
Required:
- 1. Calculate the contribution margin variance.
- 2. Calculate the contribution margin volume variance.
- 3. Calculate the sales mix variance.
1.
Compute the contribution margin variance.
Explanation of Solution
Contribution margin variance: Contribution margin variance reflects difference between the actual contribution margin and budgeted contribution margin. It is computed using the given formula:
Compute the contribution margin variance:
| Particulars | Basic | Complete | Total |
| Actual results: | |||
|
Sales: | $280,000 | $120,000 | $400,000 |
|
Less: Variable expenses: | ($170,000) | ($96,000) | ($226,000) |
| Actual Contribution margin | $110,000< |
2.
Compute the contribution margin volume variance.
3.
Compute the sales mix variance.
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