Question #80030
A furniture manufacturer predicts that they will sell 12,000 of product A and 8,000 of product B in the next financial period. They prepare their budget accordingly.
At the end of the financial period the actual figures are 15,000 for product A and 7,000 for product B. Costs are assigned and the wholesale margin on product A is calculated to be $450 and on product B it is $350.
Calculate the predicted and the actual sales mix, the variances that need to be examined and their impact
At the end of the financial period the actual figures are 15,000 for product A and 7,000 for product B. Costs are assigned and the wholesale margin on product A is calculated to be $450 and on product B it is $350.
Calculate the predicted and the actual sales mix, the variances that need to be examined and their impact
Expert's answer
Predicted: 12,000 of product A and 8,000 of product B.
Actual: 15,000 for product A and 7,000 for product B.
The wholesale margin on product A is calculated to be $450 and on product B it is $350.
The predicted sales mix is 12,000/20,000 = 60% of A to 40% of B.
The actual sales mix is 15,000/22,000 = 68.2% of A to 31.8% of B.
The sales mix variance for A is 15,000*(0.682% - 0.6%)*$450 = 553,500 or favorable variance.
For B, the sales mix variance is 7,000*(0.318 - 0.4)*350 = -200,900 or unfavorable variance.
Actual: 15,000 for product A and 7,000 for product B.
The wholesale margin on product A is calculated to be $450 and on product B it is $350.
The predicted sales mix is 12,000/20,000 = 60% of A to 40% of B.
The actual sales mix is 15,000/22,000 = 68.2% of A to 31.8% of B.
The sales mix variance for A is 15,000*(0.682% - 0.6%)*$450 = 553,500 or favorable variance.
For B, the sales mix variance is 7,000*(0.318 - 0.4)*350 = -200,900 or unfavorable variance.
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