Chapter five measuring yield, mix and quantity effects learning Objectives
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Applied Econometrics using MATLAB, Management and Cost Accounting, case study 301.docx
| Sales-mix variance The sales-mix variance is the difference between two amounts (1) the budgeted amount for the actual sales mix, and (2) the budgeted amount if the budgeted S mix had been unchanged. The formula for computing the sales-mix variance of revenue and the amounts for Global Air is: Sales-mix Actual units Actual Budgeted Budgeted Variance of = of all sales-mix - sales mix x Selling price Revenues products sold percentage percentage per unit First class = 24000 xx F Business class = 24000 xx F Economy class = 24000 xx U Total F 14 A favorable sales-mix variance arise at the individual product level when the actual sales-mix percentage exceeds the budgeted sales-mix percentage. This situation applies to both first class (actual versus 5% budgeted) and business class (25% actual versus 15% budgeted). In contrast, economy class has an unfavorable variance because the actual sales mix percentage (65%) is less than the budgeted sales-mix percentage (The concept behind the sales-mix variance for revenues of 66 360 000 F is best explained in terms of the budgeted selling prices per composite unit of the sales mix. A composite product unit is a hypothetical unit with weights related to the individual products of the company. The weights for the revenue-based variances are calculated as follows in column 3 for the actual mix and column 5 for the budgeted mix: Budgeted Budgeted Budgeted selling price selling price Selling Actual per composite budgeted per composite Price sales-mix unit for sales-mix unit for per unit percentage actual mix percentage budgeted mix (1) (2) (3) =(1) x) (4) (5)=(1) x(4) First class $3200 0.10 $320 Budgeted class 0.25 600 0.15 Economy class 0.65 585 0.80 Total The actual sales mix has a budgeted selling price per composite unit of $1505 (where the composite unit comprises 0.10 of first class, 0.25 of business class and 0.65 of economy class). The budgeted sales mix had a budgeted selling price per composite unit of $1240 (where the composite unit comprises 0.05 of first, 0.15 of business and 0,80 of economy. Thus, the effect of the 2002 sales-mix shift for Global Air is to increase the budgeted selling price per composite unit by $265 ($1505 - $1240). For the 24000 units actually sold, this increase translates to a favorable sales-mix variance of $6 million. Exhibit 17,5 shows how both the sales-mix and sales-quantity variances can be calculated using the columnar approach introduced in Chapter 15. Exhibit 17.5 highlights the revenue effect of the shift towards a mix with higher revenue generating units (first class and business class) and the revenue effect of the 20% increase in total units sold (actual of 24000 round- trips versus 20000 budgeted). Download 182.97 Kb. Share with your friends:
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