Question

Chow-4-Hounds (C4H) makes pet food for sale in supermarkets. C4H produces two general types: Branded and Generic. The two differ primarily in the ingredients used. At budget, Branded sells for $29 per case and has a variable cost to produce of $22 per case. Generic sells for a budgeted $26 per case and has a budgeted variable cost to produce of $21 per case. C4H expects to sell 20 percent Branded and 80 percent Generic regardless of the sales volume. C4H budgeted total sales of 217,000 cases for March. Actual case volume sold in March was 244,000 cases, of which 68,500 were Branded. Total actual revenues in March were $2,072,000, of which $788,500 were from sales of Branded cases.

Required:

a. Compute the activity variance for C4H for March. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

b. Compute the mix and quantity variances for March. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

Answer 1

a. Computation of Activity Variance
Particular	Branded	Generic	Total
Mix Ratio	20%	80%
Budgeted sales (a) ( Sales * Mix Ratio)	43,400	173,600	217,000
Actual Sales (b)	68,500	175,500	244,000
Difference (c=a-b)	(25,100)	(1,900)
Budgeted Contribution ( d)	$29-$22=$7	$26-$21=$5
Activity variance (c*d)	-$175,700	-$9,500
	Favourable	Favourable
Activity variance	(Budgeted Sales - Actual Sales) X  Budgeted Contr. Margin Per Unit

b(i)Computation of Mix Variance
Particular	Branded	Generic	Total
Budgeted mix	20%	80%
Actual sold mix required (a)	48,800	195,200	244,000
Actual sold (b)	60,000	150,000
Difference(c=a-b)	(11,200)	45,200
Margin (C*d)	$7	$5
Mix Variance	-$78,400	$226,000
	Favourable	Unfavorable
Mix variance	(Budgeted Sales -  Actual Sales) X  Budgeted Contr. Margin Per Unit

Computation of Quanity Variance
Particular	Branded	Generic	Total
Budgeted mix	20%	80%
Actual sold mix required (a)	48,800	195,200	244,000
Actual sold (b)	60,000	150,000
Difference(c=a-b)	(11,200)	45,200
Standard Cost (d)	$22.00	$21.00
Qty Varaince(cXd)	-$246,400	$949,200
	Favourable	Unfavorable
Mix variance	(Budgeted Sales -  Actual Sales) X Std. Cost per Unit