Question

In: Accounting

A-Zone Media sells two models of e-readers. The budgeted price per unit for the wireless model...

A-Zone Media sells two models of e-readers. The budgeted price per unit for the wireless model is $202 and the budgeted price per unit for the wireless and cellular model is $436. The master budget called for sales of 11,000 wireless models and 3,000 wireless and cellular models during the current year. Actual results showed sales of 8,500 wireless models, with a price of $250 per unit, and 4,600 wireless and cellular models, with a price of $600 per unit. The standard variable cost per unit is $90 for a wireless model and $210 for a wireless and cellular model.

Required:

a. Compute the activity variance for these data.

b. Compute the mix and quantity variance for these data. (Enter your answers rounded to the nearest whole dollar.)

Solutions

Expert Solution

Answers:

1) Sales Activity Variance

wireless model = 280000 Unfavorable

wireless and cellular models = 361600 Favorable

.

2) Sales Mix Variance

wireless model = 200799.2 Unfavorable

wireless and cellular models = 405184.1 Favorable

.

3) Sales Quantity Variance

wireless model = 79200.8 unfavorable

wireless and cellular models = 43584.1 Unfavorable

.

Step by step solution:

Budgeted Contribution Per unit = Budgeted Selling Price- Budgeted Variable cost

wireless model = 202 -90 =112

wireless and cellular model = 436 -210 = 226

.

Part 1 Calculating Activity Variance

Sales Activity Variance = (Actual Sales Volume - Budgeted Sales volume)* Budgeted Contribution Per unit

wireless model = (8500-11000)*112 = -280000 Or 280000 Unfavorable

wireless and cellular model = (4600-3000)*226 = 361600 Favorable

.

Part 2 Calculating Mix and Quantity Variance

Calculating Budgeted Sales Mix

The budgeted sales mix is the proportion of sales volume that each product represents of the total budgeted sales volume

wireless models = 11000/(11000+3000) = 78.57%

wireless and cellular models = 3000/(11000+3000) = 21.43%

.

Calculating actual sales volume at budgeted mix

The actual sales volume at budgeted mix can be calculated by applying above percentages to actual total sales volume

wireless models = 78.57%*13100 =10292.67

wireless and cellular models = 21.43% * 13100 = 2807.33

.

Calculating the Sales mix variance

Sales mix variance = (Actual sales volume - Actual sales volume at budgeted mix) x Budgeted Contribution Per unit

wireless models = (8500- 10292.85) *112 = -200799.2 Or 200799.2 Unfavorable

wireless and cellular models = (4600-2807.15) *226 = 405184.1 Favorable

.

Calculating Sales quantity variance

Sales quantity variance = (Actual sales volume at budgeted mix - Budgeted sales volume) x Budgeted Contribution Per unit

wireless models =(10292.85-11000)*112= -79200.8 Or 79200.8 unfavorable

wireless and cellular models =(2807.15 - 3000)*226 = -43584.1 or 43584.1 Unfavorable

ekkarill92 answered 1 year ago
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