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VARIANCES – SALES

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › VARIANCES – SALES

  • This topic has 3 replies, 2 voices, and was last updated 3 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • May 10, 2021 at 6:43 pm #620249
    Gigakutkha
    Participant
    • Topics: 26
    • Replies: 11
    • ☆

    Hi,
    I need your help with this problem (from Kaplan, Question 257 / 5)
    ———————————
    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

    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.
    ————————-
    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 #620276
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54655
    • ☆☆☆☆☆

    For (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 #621473
    Gigakutkha
    Participant
    • Topics: 26
    • Replies: 11
    • ☆

    Thanks a lot!

    May 23, 2021 at 10:44 am #621510
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54655
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘VARIANCES – SALES’ is closed to new replies.

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