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The Chair Company manufactures two modular types of chairs: one for the residential market, and the...

The Chair Company manufactures two modular types of chairs: one for the residential market, and the other for the office market. Budgeted and actual operating data for the year 20XX are: Static Budget Residential Office Total Number of chairs sold 260,000 140,000 400,000 Contribution margin $26,000,000 $11,200,000 $37,200,000 Actual Results Residential Office Total Number of chairs sold 248,400 165,600 414,000 Contribution margin $22,356,000 $13,248,000 $35,604,000 a. Compute the total static-budget variance in terms of contribution margin. State whether the variance is Favorable (F) or Unfavorable (U). b. Compute the total flexible-budget variance in terms of contribution margin. Is it F or U? c. Compute the total sales-volume variance in terms of contribution margin. Is it F or U? d. Compute the sales-mix variance for residential type of chair in terms of contribution margin. Is it F or U? e. Compute the sales-mix variance for office type of chair in terms of contribution margin. Is it F or U? f. Compute the total sales-mix variance in terms of contribution margin. Is it F or U? g. Compute the sales-quantity variance for residential type of chair in terms of contribution margin. Is it F or U? h. Compute the sales-quantity variance for office type of chair in terms of contribution margin. Is it F or U? i. Compute the total sales-quantity variance in terms of contribution margin. Is it F or U?

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Expert Solution

a STATIC BUDGET VARIANCE
A Budgeted Contribution $37,200,000 (
B Actual Contribution $35,604,000
C=A-B Static Budget Variance $1,596,000 U (Unfavorable because actual contribution is less)
FLEXIBLE   BUDGET VARIANCE
Residential Office Total
A Budgeted Sales (Units) 260000 140000 400000
B Budgeted Contribution $26,000,000 $11,200,000 $37,200,000
C=B/A Budgeted Contribution per unit $100 $80
D Actual Sales (Units) 248400 165600 414000
E=D*C Flexible Budget Contribution $24,840,000 $13,248,000 $38,088,000
F Actual Contribution $22,356,000 $13,248,000 $35,604,000
G=E-F Flexible Budget Variance $2,484,000
Flexible Budget Variance(Total) $2,484,000 U (Unfavorable because actual contribution is less)
SALES VOLUME VARIANCE
Sales Volume Variance=((Actual Units Sold)-(Budgeted Sales Unit))*Contribution Per Unit
Residential Office Total
A Budgeted Contribution per unit $100 $80
B Budgeted Units Sales 260000 140000
C Actual Units Sold 248400 165600
A*(C-B) Sales Volume Variance ($1,160,000) $2,048,000 $888,000 F
Total Sales Volume Variance $888,000 F
SALES MIX VARIANCE
Standard Mix
Residential Office Total
A Budgeted Sales 260000 140000 400000
B Standard Mix 0.65 0.35 1
C Actual Sales 248400 165600 414000
D=B*414000 Units sales as per Standard Mix 269100 144900 414000
E=C-D Difference between actual Sales and Standard Mix -20700 20700
F Budgeted Contribution per unit $100 $80
G=E*F Sales Mix Variance ($2,070,000) $1,656,000 ($414,000)
Total Sales Mix Variance $414,000 U Unfavorable

ekkarill92 answered 1 year ago
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