Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 54

Sales Volume, Sales Quantity, and Sales Mix Variances Classic Ice Cream operates several stores in a major metropolitan city and its suburbs. Its budget and operating data for 2010 follow:

	Budgeted Data			Actual Operating Results
Flavor	Gallons	Selling Price per Gallon	Variable Costs per Gallon	Gallons	Selling Price per Gallon	Variable Costs per Gallon
Vanilla	250,000	$1.20	$0.50	180,000	$1.00	$0.45
Chocolate	300,000	1.50	0.60	270,000	1 .35	0.50
Strawberry	200,000	1.80	0.70	330,000	2.00	0.75
Anchovy	50,000	2.50	1.00	180,000	3.00	1.20

Required

1. Compute these variances for the individual flavors and total sold:

a. Sales volume.

b. Sales mix. Extend mix calculation to five decimal places.

c. Sales quantity.

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2. Assess sales in of 2010 based on your analyses.

Step 1 of 2

Sales Mix

	Budget		Actual
Flavor	Quantity	Mix	Quantity	Mix
Vanilla	250,000	.3125	180,000	.18750
Chocolate	300,000	.3750	270,000	.28125
Strawberry	200,000	.2500	330,000	.34375
Anchovy	50,000	.0625	180,000	.18750
Total	800,000	1.00	960,000	1.00

1.?a.?Sales Volume Variance

?	Sales Quantity				Budgeted Contribution		Sales Volume
Flavor	Actual	Budget	Difference	Margin/Unit	Variance
Vanilla 180,000	250,000	70,000	X	$0.70 =	$ 49,000 U
Chocolate	270,000	300,000	30,000	x $0.90 =	27,000 U
Strawberry	330,000	200,000	130,000	x $1.10 =	143,000 F
Anchovy	180,000	50,000	130,000	x $1.50 =	195,000 F
Total	960,000	800,000			$262,000 F

1.?b.?Sales Mix Variance

1.?c.?Sales Quantity Variance

?Recap

?	Sales Mix	Sales Quantity	Sales Volume
Flavor	Variance	Variance	Variance
Vanilla	$  84,000 U	+$  35,000 F	=$  49,000 U
Chocolate	81,000 U	+ 54,000 F	=27,000 U
Strawberry	99,000 F	+ 44,000 F	=143,000 F
Anchovy	180,000 F	+ 15,000 F	=195,000 F
Total	$114,000 F	+ $148,000 F	=$262,000 F