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Sales qty variance (kaplan exam kit n.120)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Sales qty variance (kaplan exam kit n.120)

  • This topic has 3 replies, 2 voices, and was last updated 10 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • November 15, 2014 at 11:14 pm #210296
    Marko
    Member
    • Topics: 6
    • Replies: 14
    • ☆

    Hello John,

    Another doubt with Kaplan’s offered solution. Here is the problem:

    You have been provided with the following information relating to the three products:
    Product X Product Y Product Z
    Demand (units) 1,000 2,000 3,000
    Selling price $15 $20 $30
    Profit per unit $2 $5 $2

    Actual sales for the year showed following results:
    Product X Product Y Product Z
    Units sold 1,100 2,050 2,800
    Sales value $17,050 $38,950 $86,800
    Profit $3,080 $10,455 $6,160

    What is the sales quantity variance?

    What I have done is a simple application of the rule:
    ?ctual quantity at standard contribution=1,100*$2+2,050*$5+2800*$2=$18,050
    Budgeted quantity at standard contribution=1,000*$2+2,000*$5+3000*$2=$18,000
    Therefore sales quantity variance is $50 adverse.

    However, Kaplan offers a different solution including sales mix (?), copied literally below:
    AQ AM SP AQ SM SP BQ SM SP
    units $ units $ units $
    X 1,100 2,200
    Y 2,050 10,250 *
    Z 2,800 5,600 @$3 @$3
    ———————————————————————————-
    5,950 $18,050 5,950 $17,850 6,000 $18,000
    ———————————————————————————-
    *=$3

    Sales quantity variance = $18,000 – $17,850 = $150

    Why are they including mix variance into the solution, since it it irrelevant and if SM means standard mix, how come our results differ?

    Many thanks i advance
    Regards
    Marko

    November 16, 2014 at 9:40 am #210370
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54684
    • ☆☆☆☆☆

    Kaplan’s solution is correct.

    You have simply calculated the overall sales variance. The variance occurs for two separate reasons – one is that the total overall sales have fallen, and the other is that the mix between the products has changed.

    The quantity variance is calculating the effect of the fall in total sales (from a budgeted 6,000 to an actual 5,950) and ignoring the fact that the mix has changed.

    Although not asked for, the mix variance would then compare actual total sales at actual mix, with actual total sales at standard mix.

    November 16, 2014 at 11:15 am #210409
    Marko
    Member
    • Topics: 6
    • Replies: 14
    • ☆

    Thank you John!
    I was not aware that I have taken the changed mix into the account instead of ignoring it, as the solution actually has neutralized its effect, correctly.
    Thanks

    November 16, 2014 at 4:44 pm #210480
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54684
    • ☆☆☆☆☆

    You are welcome 🙂

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    Posts
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