Question

Exercise 17-29 (Algo) Sales Mix and Quantity Variances (LO 17-4)

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.

b. Compute the mix and quantity variances for March.

Answer 1

Sales Activity Variance	Branded	Generic	Total
Budgeted quantity sold	40,400	161,600	202,000
Actual quantity sold	61,000	153,000	214,000
Difference	20,600 F	8,600 U	12,000
Budgeted selling price per unit	$ 14	$ 11
Sales activity variance	288,400 F	94,600 U	193,800 F

a.

b.

Sales Quantity Variance	Branded	Generic	Total
Budgeted quantity sold	40,400	161,600	202,000
Budgeted Sales Mix	20%	80%	100%
Actual Quantity sold @ budgeted sales mix	42,800 (214,000 x 0.20)	171,200 (214,000 x 0.80)	214,000
Difference	2,400 F	9,600 F	12,000 F
Budgeted selling price per unit	$ 14	$ 11
Sales Quantity Variance = (Budgeted units – actual units @ budgeted sales mix) x Budgeted selling price per unit	$ 33,600 F	$ 105,600 F	$ 139,200 F

Sales Mix Variance	Branded	Generic	Total
Actual quantity sold	61,000	153,000	214,000
Actual Quantity sold @ budgeted sales mix	42,800 (214,000 x 0.20)	171,200 (214,000 x 0.80)	214,000
Difference	18,200 F	18,200 U
Budgeted selling price per unit	$ 14	$ 11
Sales Mix Variance = (Actual units – Actual units @ budgeted sales mix) x Budgeted selling price per unit	$ 254,800 F	$ 200,200 U	$ 54,600 F