Question

Exercise 17-26 Sales Mix and Quantity Variances (LO 17-3) 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 $14 per case and has a variable cost to produce of $7 per case. Generic sells for a budgeted $11 per case and has a budgeted variable cost to produce of $6 per case. C4H expects to sell 20 percent Branded and 80 percent Generic regardless of the sales volume. C4H budgeted total sales of 202,000 cases for March. Actual case volume sold in March was 214,000 cases, of which 61,000 were Branded. Total actual revenues in March were $2,057,000, of which $781,000 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

Ans 1 Activity varaince
1192000-1090800	$101,200	F
	Branded	Generic
sales price	$14	$11
Less variable cost	$7	$6
Contribution margin	$7	$5
Budgeted sales	40400	161600
	(202000*20%*)	(202000*80%*)
Contribution margin	$7	$5
Total	$282,800	$808,000	$1,090,800
Actual sales	61000	153000
Contribution margin	$7	$5
Total	$427,000	$765,000	$1,192,000
ans 2
Sales Mix variance	($36,400)
working
Flexible sales	42800	171200
Actual sales	61000	153000
Difference	-18200	18200
	Unf	F
Variance
Flexible sales-actual sales	-18200	18200
Std Contribution margin	$7	$5
Varaince	($127,400)	$91,000	($36,400)
ans Sales quantity varaince	$64,800	F
Budgeted sales	40400	161600
Flexible sales	42800	171200
	(214000*20%)	(214000*80%)
Difference	2400	9600	F
Std Contribution margin	$7	$5
Amt	$16,800	$48,000	$64,800	F