Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed
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| Revenue and sales variances Curriculum linkage This part extends the variance analysis discussed in Chapter 15. The SVV in Chapter 15 is decomposed into the SMV and the SQV. The SQV is then further decomposed into market-size and market-share variances. These variances provide information on why sales differ from expectations, which helps marketing managers plan and control their activities. The earlier part of Chapter 17 explains an analogous decomposition of the FBV (for costs) into yield and mix variances. Teaching tip/correction of students misconceptions Chapter 15 explained how the FBV for DM and DL is decomposed into price and efficiency variances. Ask students whether there can be both price and efficiency variances for revenues. The answer is no. The FBV for revenues arises because Actual revenues (AP × AQ outputs ) ≠ FB revenues (BP × AQ outputs ). The FBV for revenues arises only because AP ≠ BP, so it is entirely a (selling) price variance. The DM and DL efficiency variances arise because the FB cost is BP × BQIA and the BQIA ≠ AQ inputs .) Students often confuse the three columns in the decomposition of the SVV with the three columns in Chapters decomposition of the FBV. The text’s graphic that shows the four levels of variance analysis helps to clarify the big picture. Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5 th Edition, Instructor’s Manual © Pearson Education Limited 2012 FBV Actual FB SVV SB Actual quantity Actual quantity output inputs @ BP units sold @ budgeted mix @ BP PV EV SMV SQV Actual market size @ budgeted market share @ budgeted price and mix. Market share variance Market size variance Note that the FBV decomposition is based on inputs, whereas the SVV decomposition of the SVV is based on outputs. In addition, the decomposition of the SVV is based entirely on budgeted prices. (Differences between BP and AP create FBV.) Students find sales mix and quantity variances difficult. They tend to get lost in the detailed calculations, so it is important to go slowly. Stress the intuition. For example, the SQV arises because the total quantity of units actually sold differs from the SB. The SMV arises because the mix of individual products actually sold differs from the budgeted mix. To capture the SQV, we hold the sales mix constant and to capture the SMV, we must hold sales quantity constant. Add perspective by emphasising the big picture. Download 1.72 Mb. Share with your friends:
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