Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 22

Sales Mix and Quantity Variances (L.O. 3)

AAA Electronics sells two models of electronic organizers. The budgeted price per unit for the regular model is $109.50 and the budgeted price per unit for the wireless model is $249.50. The master budget called for sales of 20,000 regular models and 9,000 wireless models during the current year. Actual results showed sales of 15,000 regular models, with a price of $112.90 per unit, and 10,000 wireless models, with a price of $253.90 per unit. The standard variable cost per unit is $50 for a regular model and $100 for a wireless model.

Required

a. Compute the activity variance for these data.

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b. Break down the activity variance into mix and quantity parts.

Step 1 of 13

A Electronics sells two models R model and W model of electronic organizers.

a.

The activity variance of both the products R model and W model of the company is calculated as under:

The activity variance is the difference between the budgeted sales of the product and the actual sales.

R Model

Budgeted price per unit (SP)	$109.50
Budgeted sales	20,000
Actual sales	15,000
Actual price per unit	$112.90
Standard variable cost per unit(SV)	$50
Contribution margin per unit SCM=(SP-SV) ($109.50-$50)	$59.50
Flexible budget AQ(SCM) (15,000×$59.50)	$892,500
Master budget (BQ×SCM) (20,000×$59.50)	$1,190,000