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- This topic has 3 replies, 2 voices, and was last updated 3 years ago by John Moffat.
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- May 10, 2021 at 6:43 pm #620249
Hi,
I need your help with this problem (from Kaplan, Question 257 / 5)
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Fort Co produces and sells three models of family car: a basic model (the Drastic), an
upgraded model (the Bomber) and a deluxe model (the Cracker). All of the cars are priced
to achieve a 6% mark up on standard cost. For the month of June, Fort Co budgeted to sell
30,000 units of the Drastic and so have 10% market share of the budgeted sales at a price
of $10,600 each. Fort Co. actually achieved a 15% share of the market, though the market
had actually contracted by 5%.
The following information is available for July.Drastic Bomber Cracker
Sales units:
– Budgeted 27,000 15,000 18,000
– Actual 26,000 16,000 14,000Budgeted sales price $10,600 $13,250 $16,960
5. Which TWO of the following statements are true?
(1) The sales mix variance would not give useful information to the management
of Fort Co if the Cracker was a van.
(2) The sales mix variance will not be affected if the labour efficiency on the
Drastic production line increases, all other factors remaining the same.
(3) The market share variance is a planning variance, not an operational variance.
(4) If the mix variance was calculated as a physical quantity, the answer would
always be zero.
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The true statements are 1 and 4. I did not get the point at all. Could you explain?
Thanks a lot,May 11, 2021 at 8:10 am #620276For (1): At the moment they are all cars and so people might buy more of one car and therefore less of another – there would be mix variance. If one of them was a van, then this isn’t a car – different people are wanting cars than vans and so selling more of one car doesn’t mean there will be an affect on the sales of vans.
For (4): I actually show this in my free lectures!!! Less units of one car means more units of another car – the net affect in terms of units is zero. It is only because the cars have different mark-ups that it will change the total profit.
May 22, 2021 at 8:11 pm #621473Thanks a lot!
May 23, 2021 at 10:44 am #621510You are welcome 🙂
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