The budgeted sales and actual sales of XYZ Baby Cot Dealers for its three products for the month of June 2012 are given as below:
| Product | Total sales ($) in ‘000s | Budgeted unit | Budgeted Margin $ in 000’s | Total sales $ in 000’s | Actual unit | Actual total margin $ in 000’s | ||||
| Vol | Price | Margin | Vol | Price | Margin | |||||
| P | 250 | 500 | 500 | 100 | 50 | 275 | 550 | 500 | 100 | 55 |
| Q | 225 | 300 | 750 | 150 | 45 | 200 | 250 | 800 | 200 | 50 |
| R | 200 | 200 | 1,000 | 200 | 40 | 95 | 100 | 950 | 150 | 15 |
| 1,000 | 135 | 900 | 120 | |||||||
Required:
Compute all the sales margin variances.
Solution:
(i) Total sales margin variance = Actual margin – Budgeted margin
| P | 550 x 100 – 500 x 100 | = | 5,000 | (F) |
| Q | 250 x 200 – 300 x 150 | = | 5,000 | (F) |
| R | 100 x 150 – 200 x 200 | = | 25,000 | (A) |
| 15,000 | (A) |
(ii) Sales margin price variance = (Actual margin – Standard margin) x number of units sold in the period
| P | (100 – 100) x 550 | = | 0 | |
| Q | (200 – 150) x 250 | = | 12,500 | (F) |
| R | (150 – 200) x 100 | = | 5,000 | (A) |
| 7,500 | (F) |
(iii) Sales margin quantity variance = (Actual quantity – Budgeted quantity) x Standard margin per unit
| P | (550 – 500) x 100 | = | 5,000 | (F) |
| Q | (250 – 300) x 150 | = | 7,500 | (A) |
| R | (100 – 200) x 200 | = | 20,000 | (A) |
| 22,500 | (A) |
(iv) Sales margin mix variance = (Actual quantity in actual mix – Actual quantity in standard mix) x standard margin per unit
| P | (550 – 450) x 100 | = | 10,000 | (F) |
| Q | (250 – 270) x 150 | = | 3,000 | (A) |
| R | (100 – 180) x 200 | = | 16,000 | (A) |
| 9,000 | (A) |
Actual number of units sold 900 at standard proportions, i.e. 50%, 30% and 20% is 450, 270 and 180.
(v) Sales margin volume variance = (Actual quantity in standard mix – Budgeted sales in standard mix) x standard margin per unit
| P | (450 – 500) x 100 | = | 5,000 | (A) |
| Q | (270 – 300) x 150 | = | 4,500 | (A) |
| R | (180 – 200) x 200 | = | 4,000 | (A) |
| 13,500 | (A) |
