Question

Contribution Margin Variance

Iliff, Inc., produces and sells two types of countertop ovens—the toaster oven and the convection oven. Budgeted and actual data for the two models are shown below.

Budgeted Amounts:

		Toaster Oven		Convection Oven		Total
Sales:
($90 × 26,500)		$2,385,000
($151 × 16,000)				$2,416,000		$4,801,000
Variable expenses		470,000		670,000		1,140,000
Contribution margin		$1,915,000		$1,746,000		$3,661,000

Actual Amounts:

		Toaster Oven		Convection Oven		Total
Sales:
($83 × 25,500)		$2,116,500
($165 × 12,000)				$1,980,000		$4,096,500
Variable expenses		535,200		739,000		1,274,200
Contribution margin		$1,581,300		$1,241,000		$2,822,300

Required:

1. Calculate the contribution margin variance.

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2. What if actual units sold of the convection oven decreased? How would that affect the contribution margin variance?

What if actual units sold of the convection oven increased? How would that affect the contribution margin variance?

Answer 1