Sales variances in a Multiproduct firm, weighted contribution margin ratio approach (Appendix C).

Tom
bikes. Tom budgets for a contribution margin ratio of 40% on the deluxe bike and 30% on the standar
for 30% of total revenue. Actual selling prices, contribution margin ratios, and fixed costs, were all as
Required:
a. Calculate Toms total profit variance for the month.
b. Decompose Toms total profit variance into a sales volume variance and a flexible
budget variance.
c. Compute the sales mix variance and the sales quantity variance, and show that they
sum to the sales volume variance.
d. Discuss the overall performance for Toms bike shop for the most recent month.

Budgeted Revenue/month
Fixed costs/month
Budgeted profits/month
Actual revenue

$100,000
$27,000
$7,000
$120,000

Master
Total # units sold (Assuming weighted
Revenue from Deluxe
Revenue from Standard
Total
CM from Deluxe
CM from Standard
Total CM
FC
Profits

Flexible - Master

100
$40,000
$60,000
$100,000
$16,000
$18,000
$34,000
$27,000
$7,000

A. TOTAL PROFIT VARIANCE

Total profit variance= Actual profit - master budget profit
Total profit variance
$5,600

B. SALES VOLUME VARIANCE & FLEXIBLE BUDGET

Sales Volume Variance
=Flexible Budget Profit - Master Budge
$6,800

WUCM ratio- Master budget

WUCM ratio- Flexible budget

34.00%
34.00%

$8,000
$12,000
$20,000
$3,200
$3,600
$6,800
$0
$6,800

Flexible Budget Variance

($1,200)

Total

$5,600

C. SALES MIX AND SALES QUANTITY VARIANCE

Sales mix variance
=actual total sales *(WUCM, flexible- WUCM, master)
$

Sales quantity variance

=(Actual sales-Budgeted sales)*WUCM, master
$

6,800

Total

6,800

atio approach (Appendix C). Tom Carroll operates a bike shop in Omaha, Nebraska. Tom budgets to earn $100,00
e bike and 30% on the standard bike. After accounting for $27,000 in fixed costs per month, Tom budgets to ea
os, and fixed costs, were all as budgeted.

and a flexible

d show that they

cent month.

Flexible
120
$48,000
$72,000
$120,000
$19,200
$21,600
$40,800
$27,000
$13,800

Actual-Flexible
($12,000)
$12,000
$0
($4,800)
$3,600
($1,200)
$0
($1,200)

Actual
120
$36,000
$84,000
$120,000
$14,400
$25,200
$39,600
$27,000
$12,600

a. Tom budgets to earn $100,000 in revenue each month; he also expects 40% of this revenue to be from delux
s per month, Tom budgets to earn $7,000 in monthly profit. For the most recent month, Tom earned $120,000 in

venue to be from deluxe bikes and the remainder to be from standard

Tom earned $120,000 in revenue. However, deluxe bikes only accounted