Question

In: Operations Management

A firm has two types of sales for one product: online and mail order. The firm...

A firm has two types of sales for one product: online and mail order. The firm understands these two types of sales to be substitutable. The firm's standard mix is 3 online sale(s) for every 8 mail order sale(s).

  • Online sales bring in $23 each
  • Mail order sales bring $7 each

The firm's actual sales were 10,000 total units with 4,000 online sale(s) and 6,000 mail order sale(s).

What is the firm's mix variance for sales?

NOTE: only input a number, without indicating favorability (for simplicity, I've made sure that the relevant variance equation leads to a positive number). Round final answer to cents if necessary.

Solutions

Expert Solution

Let us find actual sales at standard mix

So per 8 mail orders there is 3 online sale 'and the actual sale has happend of 10000 units

so based on standard mix

Online sale brings -$23

Mail order sale brings - $7

Actual sale through mail orders = (( 8/11) * 10000) * $7

Actual sale through mail orders = $ 50909.09 -----A

Actual sale through online orders = ((3/11)*10000) * $ 23

Actual sale through online orders = $ 62727.27 -----B

Total sale through standard product mix = A + B = $ 50909.09 + $ 62727.27 = $ 113636.36 ------C

Now Let us find actual sales at Actual mix

Actual online sale Qty = 4000

Actual mail order sale Qty = 6000

So Actual maix = 40000 / 6000 = 4/6

So per 6 mail orders there is 4 online sale 'and the actual sale has happend of 10000 units

so based on actual  mix

Online sale brings -$23

Mail order sale brings - $7

Actual sale through mail orders = (( 6/10) * 10000) * $7

Actual sale through mail orders = $ 42000 -----D

Actual sale through online orders = ((4/10)*10000) * $ 23

Actual sale through online orders = $ 92000 -----E

Total sale through standard Actual mix = D + E = $ 42000 + $ 92000 = $ 134000 ------F

So Firm's mix varience for sales = F - C

Substituting the values we get,

Firm's mix varience for sales = $ 134000 - $ 113636.36

Firm's mix varience for sales = $ 20363.64

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keosha answered 2 hours ago
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