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 .
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Adverse Sale mix variance
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
Plz tell me what are standard quantities for both A and B for same question
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.
John, why we consider the margin contribution and not the profit margin in this case?
Because the question says that they value inventory at the standard marginal cost.
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