Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Question
Chapter 18, Problem 33P

1.

To determine

Compute the contribution margin variance.

1.

Expert Solution
Check Mark

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:

Contribution margin variance=(Actual contribution margin)(Budgeted contribution margin)

Compute the contribution margin variance:

ParticularsModel 1Model 2Model 3Total
Actual results:    
Sales: $141,700$89,080$32,810$263,590
Less: Variable expenses($49,050)($44,540)($13,510)($10,7100)
Actual Contribution margin$92,650$44,540$19,300$156,490
  
Budgeted results:    
Sales: $135,000 $91,000 $30,000$256,000
Less: Variable expenses:($54,000)($39,000)($10,000)($103,000)
Budgeted Contribution margin$81,000$52,000$20,000$153,000
 
Computation of variance 
Actual Contribution margin (A)$156,490
Budgeted Contribution margin (B)$153,000
Contribution margin variance (A)(B)$3,490 (F)

Table (1)

Since, the actual contribution margin is more than the budgeted contribution margin; the contribution margin variance of $3,490 is favorable (F).

2.

To determine

Compute the contribution margin volume variance.

2.

Expert Solution
Check Mark

Explanation of Solution

Contribution margin volume variance: Contribution margin volume variance reflects difference between the actual quantity sold and the budgeted quantity sold multiplied by the budgeted average unit contribution margin. It is computed using the given formula:

Contribution margin volume variance}=[(Actual quantity sold)(Budgeted quantity sold)×(Budgeted average unit contribution margin)]

Compute the contribution margin volume variance:

Contribution margin volume variance}=[(Actual quantity sold (in units))(Budgeted quantity sold(in units))×(Budgeted average unit contribution margin)]=[(2,700+1,300+1,000)(2,725+1,310+965)]×$30.60=[5,0005,000]×$30.60=$0

Therefore, the contribution margin volume variance is $0.

Working note 1: Calculate the budgeted average unit contribution margin:

Budgeted average unit contribution margin}=Budgeted contribution marginBudgeted sales units=$153,0005,000 units=$30.60

3.

To determine

Compute the sales mix variance.

3.

Expert Solution
Check Mark

Explanation of Solution

Sales mix variance: The sales mix represents the part of total sales generated by each product. Sales mix variance is the summation of change in units for each product multiplied by the difference between the budgeted contribution margin and the budgeted average unit contribution margin. It is computed using the given formula:

Sales mix variance=[{(Actual units of Product1 )(Budgeted units of Product1)}×{(Budgeted contribution margin of Product1)(Budgeted average unit contribution margin)}]+[{(Actual units of Product 2 )(Budgeted units of Product 2)}×{(Budgeted contribution margin of Product 2)(Budgeted average unit contribution margin)}]

Compute the model 1 mix:

Model 1 mix=[{(Actual units)(Budgeted units)}×{(Budgeted contribution margin)(Budgeted average unit contribution margin)}]=[(2,7252,700)×($30$30.60)]=25×($0.60)=$15(Unfavorable)

Compute the model 2 mix:

Model 2 mix=[{(Actual units)(Budgeted units)}×{(Budgeted contribution margin)(Budgeted average unit contribution margin)}]=[(1,3101,300)×($40$30.60)]=10×$9.40=$94(Favorable)

Compute the model 3 mix:

Model 1 mix=[{(Actual units)(Budgeted units)}×{(Budgeted contribution margin)(Budgeted average unit contribution margin)}]=[(9651,000)×($20$30.60)]=35×($10.60)=$371(Favorable)

Compute the sales mix variance:

Sales  mix variance=(Model 1 mix variance)+(Model 2 mix variance)+(Model 3 mix variance)=($15)+$94+$371=$450(Favorable)

Thus, the sales mix variance is $450 (Favorable).

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Chapter 18 Solutions

Cornerstones of Cost Management (Cornerstones Series)

Ch. 18 - How does absorption costing differ from variable...Ch. 18 - What are some advantages and disadvantages of...Ch. 18 - Prob. 13DQCh. 18 - Prob. 14DQCh. 18 - Describe the product life cycle. How do unit-level...Ch. 18 - Ventana Window and Wall Treatments Company...Ch. 18 - Kaune Food Products Company manufactures canned...Ch. 18 - Pattison Products, Inc., began operations in...Ch. 18 - Refer to Cornerstone Exercise 18.3. Required: 1....Ch. 18 - Saginaw Company is a garden products wholesale...Ch. 18 - Iliff, Inc., produces and sells two types of...Ch. 18 - Iliff, Inc., produces and sells two types of...Ch. 18 - Refer to Cornerstone Exercise 18.6. Required: 1....Ch. 18 - Budgeted unit sales for the entire countertop oven...Ch. 18 - Prob. 10ECh. 18 - Prob. 11ECh. 18 - Prob. 12ECh. 18 - Prob. 13ECh. 18 - Many different businesses employ markup on cost to...Ch. 18 - Flaherty, Inc., has just completed its first year...Ch. 18 - During its first year of operations, Snobegon,...Ch. 18 - Prob. 17ECh. 18 - Otero Fibers, Inc., specializes in the manufacture...Ch. 18 - Data for Torleson Company are as follows:...Ch. 18 - Eastman, Inc., manufactures and sells three...Ch. 18 - Prob. 21ECh. 18 - The following information pertains to three...Ch. 18 - Thebes Company had the following information: What...Ch. 18 - Banwood Company has the following information for...Ch. 18 - Jasmine Companys expected sales were 2,000 units...Ch. 18 - Prob. 26PCh. 18 - Snyder Company produced 90,000 units during its...Ch. 18 - The following information pertains to Vladamir,...Ch. 18 - Jellison Company had the following operating data...Ch. 18 - San Mateo Optics, Inc., specializes in...Ch. 18 - Haysbert Company provides management services for...Ch. 18 - Sulert, Inc., produces and sells gel-filled ice...Ch. 18 - Prob. 33PCh. 18 - Dana Baird was manager of a new Medical Supplies...Ch. 18 - Bill Fremont, division controller and CMA, was...Ch. 18 - Dantrell Palmer has just been appointed manager of...Ch. 18 - Prob. 37PCh. 18 - Porter Insurance Company has three lines of...Ch. 18 - Porter Insurance Company has three lines of...Ch. 18 - Olin Company manufactures and distributes...Ch. 18 - Shannon, Inc., has two divisions. One produces and...Ch. 18 - Prob. 42P
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