Question:
Sales Mix and Quantity Variances
Refer to the data for the Peninsula Candy Company (Problem 17-33). Break down the total activity variance into sales mix and quantity parts.
Revenue Analysis Using Industry Data and Multiple Product Lines
Peninsula Candy Company makes three types of candy bars: Chewy, Chunky, and Choco-Lite (Lite). Sales volume for the annual budget is determined by estimating the total market volume for candy bars and then applying the company's prior year market share, adjusted for planned changes due to company programs for the coming year. Volume is apportioned among the three bars based on the prior year's product mix, again adjusted for planned changes for the coming year.
The following are the company budget and the results of operations for July.
|
Budget
|
Chewy
|
Chunky
|
Choco-Lite
|
Total
|
|
Sales-units (in thousands)
|
2,000 bars
|
2,000 bars
|
4,000 bars
|
8,000 bars
|
|
Sales-dollars (in thousands)
|
$200
|
$400
|
$600
|
$1,200
|
|
Variable costs
|
140
|
320
|
460
|
920
|
|
Contribution margin
|
$ 60
|
$ 80
|
$140
|
$ 280
|
|
Manufacturing fixed cost
|
40
|
40
|
60
|
140
|
|
Product margin
|
$ 20
|
$ 40
|
$ 80
|
$ 140
|
|
Marketing and administrative
|
|
|
|
|
|
costs (all fixed)
|
|
|
|
50
|
|
Operating profit
|
|
|
|
$ 90
|
|
Actual
|
|
|
|
|
|
Sales-units (in thousands)
|
1,600 bars
|
2,000 bars
|
4,200 bars
|
7,800 bars
|
|
Sales-dollars (in thousands)
|
$162
|
$400
|
$600
|
$1,162
|
|
Variable costs
|
112
|
322
|
464
|
898
|
|
Contribution margin
|
$ 50
|
$ 78
|
$136
|
$ 264
|
|
Manufacturing fixed cost
|
42
|
44
|
63
|
149
|
|
Product margin
|
$ 8
|
$ 34
|
$ 73
|
$ 115
|
|
Marketing and administrative
|
|
|
|
|
|
costs (all fixed)
|
|
|
|
55
|
|
Operating profit
|
|
|
|
$ 60
|
Industry volume was estimated at 80 million bars for budgeting purposes. Actual industry volume for July was 76 million bars.
Required
a. Prepare an analysis to show the effects of the sales price and sales activity variances.
b. Break down the sales activity variance into the parts caused by industry volume and market share.