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General Accounting Discussions: Variance analysis, multiple products (Cost Accounting)

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    • CommentAuthorJJM2009
    • CommentTimeMay 13th 2007
     
    I need help with this problem please.

    Budget for 2006 Actual for 2006
    Selling price Variable cost Cartons sold Selling price V.C. per Cartons
    per carton per carton per carton carton sold

    Product
    Kola $6.00 $4.00 400,000 $6.20 $4.50 480,000
    Limor $4.00 $2.80 600,000 $4.25 $2.75 900,000
    Oriem $7.00 $4.50 1,500,000 $6.80 $4.60 1,620,000

    1. Compute the total sales-volume variance, the total sales-mix variance, and the total sales-quantity variance. (Calculate all variances in terms of contribution margin). Show results for each product in your computations.

    2. What inferences can you draw from the variances computed in requirement 1?
    • CommentAuthoredlbutler
    • CommentTimeMay 18th 2007
     
    I may be able to help with this problem, but I'm having difficulty understanding the numbers you are presenting for the problem. I have quite a bit of experience with manufacturing variances. Volume variance is the difference between budgeted volumes and actual volumes. The sales mix variance is better explained in an example. Let say you have a plan or budget to sell product A in the amount of 1,000 items, product B in the amount of 3,000 items. The actual sales amounts were product A in the amount of 2000 items, and product B in the amount of 1,000 items. The difference between the budgeted sales for these two products and the actual sales of these same two products yields the sales mix. Quantity and Volume variance may be closely related. The quantity variance relates to the number of items included in the volume.
    • CommentAuthoredlbutler
    • CommentTimeMay 18th 2007
     
    A revision to my previous explanation of sales mix variance. I inadvertently omitted the word variance at the end of my definition of the sales mix variance. The sentence should have read; The difference between the budgeted sales mix for these two product and the actual sales mix of these same two products yields the sales mix variance. Hopefully that will make the definition of sales mix variance clearer.

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