In: Accounting
Contribution Margin Variance, Contribution Margin Volume Variance, Market Share Variance, Market Size Variance
Sulert, Inc., produces and sells gel-filled ice packs. Sulert’s performance report for April follows:
Actual | Budgeted | ||||
Units sold | 290,000 | 300,000 | |||
Sales | $1,450,000 | $1,515,000 | |||
Variable costs | 652,500 | 636,300 | |||
Contribution margin | $ 797,500 | $ 878,700 | |||
Market size (in units) | 1,250,000 | 1,200,000 |
Required:
1. Calculate the contribution margin variance and the contribution margin volume variance. In your computations, round the contribution margin per unit to three decimal places.
Contribution margin variance | $ |
Contribution margin volume variance | $ |
2. Calculate the market share variance and the market size variance. In your computations, round the unit contribution margin to three decimal places and round the market share percentage to one decimal place (for example, .8439 would be rounded to 84.4%). Round your final answers to the nearest dollar. (CMA adapted)
Market share variance | $ |
Market size variance | $ |
1 | |||
CM Variance = (Actual CM Per Unit – Budgeted CM Per Unit) × Actual Sales | ((797500/290000)-(878700/300000))*290000 | -$51,910 | |
Contribution margin volume variance | |||
Contribution margin volume variance = (Actual quantity sold – Budgeted quantity sold) × Budgeted average unit contribution margin | (290000-300000)*(878700/300000) | -$29,290 | |
2 | Market share variance | ||
(Actual market share % - Budgeted market share %) x Total market in units x Average Budgeted Contribution perunit | ((290000/1250000)-(300000/1200000))*1250000*(878700/300000)) | -$65,903 | |
Market size variance | |||
Budgeted market share % x (Actual industry sales quantity in units - budgeted industry sales quantity in units)*(average budgeted contribution per unit) | ((300000/1200000)*(1250000-1200000)*(878700/300000)) | $36,613 | |
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