Question

 

Popular Toys Inc. sells toys that are in the top 10% of market demand. The two bestselling toys are the Personal Robot and the Smart Bear. The past year’s budget and actual sales and market data for these two products are shown below:

Expected (budget) data                                          Personal Robot                                   Smart Bear

Expected total industry salesin units                                    600,000                                    480,000

Expected company salesinunits                                           38,500                                        45,600

Expected selling price per unit                                                $130                                             $100

Expected variable cost per unit                                                 $75                                               $60

Actual data

Industry sales in units                                          580,000                                          410,000

Company sales in units                                                            36,500                                           42,600

Selling price per unit                                                                 $125                                                 $90

Variable cost per unit                                                               $ 80                                                   $653

.Which of the following is the sum of thesales mix variances for both products?

a)$1,109 F

b)$4,334 F

c)$5,779 F

d)$27,449 F

4.Which of the following is the market share variance for both products?

a)$94,195F

b)$102,681 F

c)$190,791F

d)$208,135F          

Answer 1

3) Option B) $ 4,334 F is the correct alternative

Step 1) calculation for the standard mix ratio

Personal robot = [38,500 / (38,500 + 45,600)] X 100% = 45.779%

Smart bear = [ 45,600 / ( 38,500 + 45,600)] X100% = 54.221%

Step 2) Calculation for sales quantity in proportion to the standard mix:

Unit sales at standard mix :

Total sales during the period = 36,500 + 42,600 = 79,100

Sales of personal robot = 79,100 X 45.779% = 36,211

Sales of smart bear = 79,100 X 54.221% = 42,889

3) Calculation for difference in between actual sales quantity and sales quantity in standard mix

Personal robot = 36,500 - 36,211= 289 ( favorable)

Smart bear = 42,600 - 42,889= (289) Adverse

Step 4) Calculation for standard contribution per unit :

Personal robot = revenue - variable cost = $ 130 - $ 75 = $ 55

Smart bear = revenue - variable cost = $ 100 - $60 = $ 40

Step 5) calculation for the variance for each products

Variance = standard contribution per unit X [ Actual quantity - standard mix ]

Personal robot = $ 55 X 289 = $ 15,895 ( favorable )

Smart bear = $ 40 X 289 = 11,560 ( adverse )

Step 6) sales mix variance = $15,895 + $( 11,560) = $ 4,335 ( favorable ) [ Approximately ]

4) option B) $ 102,681 F is the correct alternative

Explanation :

Market share variance = [(Actual market share percentage - Budgeted market share percentage) X Actual industry sales in units ] X Budgeted unit contribution margin

Product : Personal robot :

Actual market share percentage = [ 36,500/ 580,000] X 100 % = 6.29310%

Budgeted market share percentage = [ 38,500/ 600,000] X 100% = 6.41667%

Actual industry sales in units = 580,000 units

Budgeted unit contribution margin = $ 55

Market share variance = [ 6.29310 %- 6.41667%] X 580,000 X 55 = $ 39,418.83 (unfavorable)

Smart bear :

Actual market share percentage = [ 42,600/ 410,000] X 100% = 10.39024

Budgeted market share percentage = [ 45,600/ 480,000] X 100% = 9.50%

Actual industry sales in units = 410,000

Budgeted contribution margin = 40

Market share variance = [ 10.39024% - 9.50%] X 410,000 X 40 = $ 145,999.36 ( favorable)

Total market share variance = $( 39,418.83) + $ 145,999.36 = $ 106,580.53 favorable (Approximately)