Use with Excel

The TV Corporation manufactures 2 types of TVs. The Basic TV

and the Deluxe TV. Budgeted and actual annual operating data are
as follows:

Static Budget

Basic

Deluxe

Total

Number units Sold

60,000

40,000

100,000

Total Contribution Margin

$3,480,000

$3,444,000

$6,924,000

Budgeted CM per unit

$58.00

$86.10

Actual Results

Number units sold

59,850

45,150

105,000

Total Contribution Margin

$3,650,850

$3,612,000

$7,262,850

But, the actual industry volume was

300,000

Units

Prior to the beginning of the year, a consulting firm estimated
the total volume

for volume of the Basic and Deluxe industry category to be

310,000

Units

Required:

Calculate the following information and variances on the
worksheet entitled analysis. I have tried to give some helpful
hints.

Use the contribution margin approach in the following sales
variance analysis that follows.

a. Calculate the Static-budget variance.

I have tried to set up a model to use on the analysis
worksheet.

Look at Exhibit 14-11 p.571

b. Calculate the contribution margin for the flexible
budget.

c. Calculate the flexible budget variance.

d. Calculate the sales-volume variance.

e. Compute the actual sales-mix

f. Compute the budgeted sales-mix

g . Compute the sales-mix variance for each product and
then the total sales-mix variance like the table shown on
page 572. I have set up the table for you to fill in.

h. Compute the sales-quantity variance by type of machine and
total

if total actual quantity is greater than total budgeted units
the sales-quantity will always be F and the opposite will occur
when actual is less than budgeted).

i. Compute the market-share variance

j. Compute the market-size variance.

4

k. Comment on the results of the above variance analysis. Make
sure your comments identify specific variances and

the impact of these variances on income.

Do not forget to use the IF function to determine if the
variance is favorable or unfavorable.

I used a formula approach like the author did and I expect
everyone to use cell references and use the Problem 2 worksheet as
your data for cell references.

I will take off 5 pts. if you have not used cell references from
the problem 2 worksheet as your reference for the calculations. I
will take off 3 pts. for not using IF statements or 1/2 each.

When you are adding multiple variances, either use the SUMIF
function or a nested IF.

Also, make sure you are using ABS function, since variances
should not be positive and negative.

I have color coded some areas that should match, since you can
use these variances to check your work since they should equal each
other.

Comments in “K” are worth 1 pt. You need to clearly identify
multiple sales variance you have calculated and the impact in
income.

a. Calculate the Static-budget variance.

$338,850

F

Static Budgeted Variance =Actual total contribution margin less
Static total Contribution margin

Look at level 1 in Panel C in exhibit 14-11.

b. Calculate the contribution margin for the flexible
budget.

Basic

Deluxe

Total

Budgeted contribution margin per unit

$58

$86

Do not Total

Actual Number of units sold

Do not Total

Flexible -Budget Contribution Margin

c. Calculate the flexible budget variance.

d. Calculate the sales-volume variance.

Check Figure: static budget variance=flexible budget

variance+Sales volume Variance

Basic

Deluxe

e. Calculate the Actual sales mix:

f. Calculate the Budgeted sales mix:

g . Compute the sales-mix variance for each product and then the
total sales-mix variance like the table shown on page 572. I have
set up the table for you to fill in.

Actual Units of All products sold

(Actual sales-mix%-Budgeted Sales Mix%

Budgeted Contribution Margin per unit

Sales-Mix Variance

Basic

Deluxe

g. Total Sales mix variance

Compute the sales-quantity variance by type of product and
total.

Basic

Deluxe

h. Total Sales quantity variance

Check Figure: Sales-volume variance=Sales mix
variance+Sales Quantity Variance

Calculate the Actual market share:

Calculate the Budgeted market share:

Calculate the budgeted contribution margin

per composite unit of budgeted mix

Lastly:

I. Market-share Variance

j. Compute the market-size variance.

Check Figure: Sales-quantity variance=Market-share
variance+Market size Variance

k. Comment on the results of the above variance analysis. Make
sure your comments identify specific variances and the impact of
these variances on income.