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Yellow sells two types of squash ball, the type A and the type B. The standard contribution
from 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 its stock of balls at standard marginal cost.
What is the value of the favourable sales quantity variance?According to the way I know the longer method I got the answer wrong …but according to Kaplan it’s the short way but I didn’t understand how did they get total budgeted sales as 220000.. plz explain
It doesn’t matter which way you do your workings – any way will give the same final answer.
The question says that sales were up by 20,000 and were 240,000 balls. Therefore the budgeted sales must have been 240,000 less 20,000, which is 220,000 🙂
The budget sales are A: 5/8 x 220,000 = 137,500. and B: 3/8 x 220,000 = 82,500.
At standard contribution this gives a total contribution of: $962,500The actual total sales, at standard mix, are A: 5/8 x 240,000 = 150,000, and B: 3/8 x 240,000 = 90,000.
At standard contribution this gives a total contribution of $1,050,000Therefore the quantity variance is the difference of $87,500 (F)
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