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

Exercise 55

Sales Volume, Sales Quantity, and Sales Mix Variances; Working Backward DOA Alive is a group of aspiring musicians and actors who perform in theaters and dinner clubs. It has a matinee and evening show. These operating data pertain to the month of July:

Master budget data
Total operating income	$10,000
Total monthly fixed cost	$39,200
Total number of shows	100
Contribution margin per show: Matinee	$ 240
Evening	$ 600
Actual operating results
Total sales quantity variance	$ 4,920U
The actual matinees were 150 percent of the evening shows.

Required

1. Calculate for each type of show and the total:

a. Sales mix variances.

b. Sales quantity variances.

c. Sales volume variances.

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2. What strategic implications can you draw from the variances?

Step 1 of 3

Budget and variance:

Budget is a statement prepared by the management of the business entity which helps them to estimate the expenses, income, receipts, payment, sales and purchases during the period. It is prepared keeping in mind the companies’ objectives and abilities with respect to resources they have. Often businesses deviate from their budgeted figures either in favourable way or unfavourable way. Such deviations are commonly referred to as variances.