Question

Contribution Margin Variance, Contribution Margin

Volume Variance, Sales Mix Variance

Kingston Company provides management services for apartments and rental units. In general, Kingston packages its services into two groups: basic and complete. The basic package includes advertising vacant units, showing potential renters through them, and collecting monthly rent and remitting it to the owner. The complete package adds maintenance of units and bookkeeping to the basic package. Packages are priced on a perrental unit basis. Actual results from last year are as follows:

Basic Complete

Sales (rental units) 700 300

Selling price $120 $260

Variable expenses $70 $180

Kingston had budgeted the following amounts:

Basic Complete

Sales (units) 715 285

Selling price $110 $275

Variable expenses $70 $200

Required:

1. Calculate the contribution margin variance.

2. Calculate the contribution margin volume variance. (Round calculations to three

decimal places.)

3. Calculate the sales mix variance. (Round calculations to three decimal places.)

Answer 1

Answer :

Answer :
1	Contribution margin volume variance = (Actual quantity sold - Budgeted quantity sold) * Budgeted average unit contribution
	Actual units = 700 + 300 = 1000
	Budgeted units = 715 + 285 = 1000
	Total budgeted contribution margin = ( sales units *(sales price -veriable expence)
	Total budgeted contribution margin = (715 * ($110 - $70)) + 285 * ($275 - $200)) = $ 49,975.00
	= $ 49975.00
	Budgeted average unit contribution margin = $49,975.00 / 1,000 = $ 49,975.00
	(Total budgeted contribution margin / Budgeted units)
2	Contribution margin volume variance = (1000 - 1000) * $49.9750
	= $ 0.000
3	c). Sales mix variance = [(Product 1 actual units – Product 1 budgeted units) × (Product 1 budgeted contribution margin – Budgeted average unit contribution margin)] + [(Product 2 actual units – Product 2 budgeted units) × (Product 2 budgeted contribution margin – Budgeted average unit contribution margin)]
	= [700-715) × ($40 – $49.975)] + [(300 – 285) × ($75 – $49.9750]
	= -149.625 +375.375
	= $ 525.000