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Hi
Could I get the workings for the following question:
A company has budgeted on selling 7,000 units of product X at a selling price of $30 per unit, and 3,000 units of Product Y at a selling price of $40 per unit. The standard contribution per unit is 30% of selling price for both products.
They actually sell 8,000 units of X and 7,000 units of Y.
What is the sales quantity variance?
They budget on selling 7,000 X’s and 3,000 Y’s – 10,000 units in total.
The actually sold a total of 15,000 units, and so if they had mixed them in the correct way, this would have been 7/10 x 15,000 = 10,500 X’s, and 3/10 x 15,000 = 4,500 Y’s.
The quantity variance is only looking at the difference in the total quantity (ignoring the fact that we changed the proportions – this is the mix variance).
If you cost out the budget (7,000 and 3,000) and the standard mix for the actual total (10,500 and 4,500) – in both cases at standard contribution per unit – then you will have the quantity variance.
Thanks John, I now get it. The sales quantity variance is;
Budgeted sales in total 10,000 units
Actual sales in total 15,000 units
_________
Sales quantity Variance in units 5,000 (F)
standard weighted average
contribution per unit $9.90
_________
Sales qty. variance in $ $49,500
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