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Adverse Sale mix variance

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Adverse Sale mix variance

  • This topic has 5 replies, 4 voices, and was last updated 6 years ago by John Moffat.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • September 1, 2017 at 7:44 am #404659
    iyamu
    Participant
    • Topics: 286
    • Replies: 171
    • ☆☆☆

    Bloom limited was the subject of the following press story : yellow sells two types of squash ball, the type A and the type B . The standard contribution from the these balls is $4 and $5 respectively and the standard profit per ball is $1.50 and $2.40 respectively . The budget was to sell 5 type A balls for every 3 type B balls .
    Actual sales were up 20,000 at 240,000 balls with type A balls being 200,000 of that total. Yellow values it’s stock of balls at std marginal cost.
    What is the value of the adverse sales mix variance .
    I have no problems finding the std. contribution from std mix $ which I have calculated to be $1,050,000 but the std contribution from actual mix $ is where I got a problem and the kit did not give a clue on this but just the round figure of $1,000,000. The adverse sales mix variance = 1,000,000 – 1,050,000 = $ 50000adv

    Please , kindly assist on this to find the std contribution from actual mix $ .

    Thanks in advance .

    September 1, 2017 at 11:26 am #404838
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    The actual sales are 200,000 type A and 40,000 type B.

    So the standard contribution = (200,000 x $4) + (40,000 x $5) = $1,000,000

    November 14, 2018 at 8:35 am #484768
    waqar
    Member
    • Topics: 1
    • Replies: 2
    • ☆

    Plz tell me what are standard quantities for both A and B for same question

    November 14, 2018 at 5:55 pm #484828
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    Since the question says that out of every 8 balls, 5 will be A and 3 will be B, then the standard quantities will be for A 5/8 of the total and for B 3/8 of the total.

    November 20, 2018 at 3:14 am #485285
    dipatil
    Participant
    • Topics: 56
    • Replies: 104
    • ☆☆

    John, why we consider the margin contribution and not the profit margin in this case?

    November 20, 2018 at 7:28 am #485295
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    Because the question says that they value inventory at the standard marginal cost.

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