RevGenR Seats Incorporated - variance anylysis
Question 2
a. Actual units of all products sold= 5,940+16,060 = 22,000 units Budgeted units of all products sold = 4,788 + 18,012 = 22,800 units
(i)
Golf Cart = 22,000 x [(5,940/22,000)-(4,788/22,800)] x 134 = $176,880 (F)
Mobility vehicle = 22,000 x [(16,060/22,000)-(18,012/22,800)] x 164 = $216,480 (U)
Total sale mix variance= $39,600 (U)
(ii)
Golf Cart = (22,000 – 22,800) x (4,788/22,800) x 134 = $22,512 (U)
Mobility vehicle = (22,000 – 22,800) x (18,012/22,800) x 164 = $103,648 (U)
Total sale quantity variance= $126,160(U)
b. Based on above analysis, there are unfavorable total sale mix variance of $39,600 and unfavorable total sale quantity variance of $126,160. It means the marketing and sales personnel didn’t perform properly and caused the both unfavorable variance happened. There are two reasons. First, the sale mix variance quantifies the effects on contribution margin of selling the two products in a mix that differs from the original budget. As shown in the analysis above, RevGenr had a budgeted mix of 21% Golf Cart (4,788/22,800) and 79% Mobility vehicle (18,012/22,800). However, the actual mix turned out to be 27% Golf cart (5,940/22,000) and 73% Mobility vehicle (16,060/22,000). Selling a lower proportion of Mobility vehicle from 79% to 73% generates an unfavourable total sales mix variance because Mobility vehicle has a higher contribution margin of $164 per unit compared to $134 per unit for Golf cart. Secondly, the sales quantity variance isolates the effect on contribution margin of unit sales differing from the budget, holding constant the sales mix at the budgeted proportions. Because total sales quantity was 22,000 units compared to the budget of 22,800 units, it caused the total quantity variance is unfavourable.
c.
Actual market share =
a. Actual units of all products sold= 5,940+16,060 = 22,000 units Budgeted units of all products sold = 4,788 + 18,012 = 22,800 units
(i)
Golf Cart = 22,000 x [(5,940/22,000)-(4,788/22,800)] x 134 = $176,880 (F)
Mobility vehicle = 22,000 x [(16,060/22,000)-(18,012/22,800)] x 164 = $216,480 (U)
Total sale mix variance= $39,600 (U)
(ii)
Golf Cart = (22,000 – 22,800) x (4,788/22,800) x 134 = $22,512 (U)
Mobility vehicle = (22,000 – 22,800) x (18,012/22,800) x 164 = $103,648 (U)
Total sale quantity variance= $126,160(U)
b. Based on above analysis, there are unfavorable total sale mix variance of $39,600 and unfavorable total sale quantity variance of $126,160. It means the marketing and sales personnel didn’t perform properly and caused the both unfavorable variance happened. There are two reasons. First, the sale mix variance quantifies the effects on contribution margin of selling the two products in a mix that differs from the original budget. As shown in the analysis above, RevGenr had a budgeted mix of 21% Golf Cart (4,788/22,800) and 79% Mobility vehicle (18,012/22,800). However, the actual mix turned out to be 27% Golf cart (5,940/22,000) and 73% Mobility vehicle (16,060/22,000). Selling a lower proportion of Mobility vehicle from 79% to 73% generates an unfavourable total sales mix variance because Mobility vehicle has a higher contribution margin of $164 per unit compared to $134 per unit for Golf cart. Secondly, the sales quantity variance isolates the effect on contribution margin of unit sales differing from the budget, holding constant the sales mix at the budgeted proportions. Because total sales quantity was 22,000 units compared to the budget of 22,800 units, it caused the total quantity variance is unfavourable.
c.
Actual market share =