Question

Contribution Margin Variance, Contribution Margin Volume Variance, Sales Mix Variance

Haysbert Company provides management services for apartments and rental units. In general, Haysbert 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 per-rental unit basis. Actual results from last year are as follows:

		Basic		Complete
Sales (rental units)		2,000		400
Selling price		$140		$300
Variable expenses		$85		$240

Haysbert had budgeted the following amounts:

		Basic		Complete
Sales (rental units)		1,950		460
Selling price		$145		$290
Variable expenses		$90		$242

Required:

1. Calculate the contribution margin variance.
$ Favorable

2. Calculate the contribution margin volume variance. Round the budgeted average unit contribution margin to four decimal places. Round your final answer to the nearest cent.
$ Unfavorable

3. Calculate the sales mix variance. Round the budgeted average unit contribution margin to four decimal places. Round your final answer to the nearest cent.
$

Favorable

Answer 1

Contribution Margin:
Actual margin: Basic = 140 - 85 = 55 per unit
                  Complete = 300-240 = 60 per unit
Std margin : Basic = 145-90 = 55 per unit
                     Complete = 290-242 = 48 per unit

Contribution margin Variance = Acutual Quantity * Actual margin - Budgeted Qty * Budgeted margin
Basic = (2000*55) - (1950*55) = 2750 F
Complete = (400* 60) - (460*48) = 1920 F
Total = 2750+1920 = 4670 F

Contribution margin volume variance = Budgeted Margin * Actual Qty - Budgeted Margin * Budgeted Qty
Basic= (55*2000) - (55*1950) = 2750 F
Complete = (48*400) - (48*460) = 2880 U
Total = 2750-2880 = 130 U

Sales Mix Variance = Total Actual Qty units * (Average budgeted price per unit of actual mix - Average budgeted price per unit of budgeted mix)
Total Actual Qty = 2000+400 = 2400 units
Average budgeted price per unit of actual mix = ((2000*145) + (400*290)) / (2000+400)
= (290000+116000) / 2400 = 169.1666
Average budgeted price per unit of budgeted mix = ((1950*145) + (460*290)) / (1950+460)
= (282750 + 133400) / 2410 = 172.6763

Sales Mix Variance = 2400*(169.1666 - 172.6763) = 8423.28 U

Here in Question it is saying Sales mix variance but further talks about contribution variance, Both are different.
Contibution margin mix variance is as follows: Formula remains same but in place of seling price Contribution margin per unit is used:
Mix Variance = 2400*(53.8333 - 53.6639) = 406.56 F