VARIANCE

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 14,000 Budgeted sales price $10,600 $13,250 $16,960 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. A (1) and (2) B (2) and (3) C (3) and (4) D (1) and (4)