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Hello I was doing this question and i don’t understand if you can please explain! thankyou!
Yellow sells two types of squash balls: 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 240,000 balls which is 20,000 balls higher than budgeted. The actual sales included 200,000 of the type A balls. Yellow values its stock of balls at standard marginal cost.
what is the adverse sales mix variance?
So for this i got the answer right as:
200k. 800k 150k 5/8 600k
40k. 200k 90k 3/8 450k
TOTAL 240k 1M 240K 1M 050Difference in contribution 50,000 Adv – correct
Part b I don’t understand
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 240,000 balls which is 20,000 balls higher than budgeted. The actual sales included 200,000 of the type A balls. Yellow values its stock of balls at standard marginal cost.
work out value of F sales Quantity Variance
So for this i got the answer as:
200k. 5/8 600k. 200k std 4 800k
40k. 3/8 450k 20k 5 100k
TOTAL 240k 1M 050 220k 900kso diff =150k
but the answer in text book=
Total actual sales 240,000
Total budget sales 220,000
Difference 20,000
Average standard contribution $4.375 ((5 × 4) + (3 × 5))/8 = 4.375
Favourable variance is $87,500I don’t understand where I am going wrong it may be a silly mistake but if you could help please. thanks so much! I don’t mainly understand why an avg std cont was used is it because the exact original budgeted mix is unknown?
I don’t understand your calculations because of the way they are set out.
The actual 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 of (150,000 x $4) + (90,000 x $5) = $1,050,000The budget sales are A: 5/8 x 220,000 = 137,500, B: 3/8 x 220,000 = 82,500
At standard contribution this gives a total of (137,500 x $4) + (82,500 x $5) = $962,500Therefore the variance is 1,050,000 – 962,500 = $87,500 (F)
sorry about that I realised after I posted it, was all over the place and not formatted.
I understand the answer! the budgeted the amounts are usually given so i just assumed it was 220k split as 200 and 20k but you have to used the budgeted weighings as given 3/8 and 5/8 to split it as 137,500 and 82,500!thank you so much 🙂
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