A furniture manufacturer predicts that they will sell 12,000 of product A and 8,000 of product B in the next financial period. They prepare their budget accordingly.
At the end of the financial period the actual figures are 15,000 for product A and 7,000 for product B. Costs are assigned and the wholesale margin on product A is calculated to be $450 and on product B it is $350.
Calculate the predicted and the actual sales mix, the variances that need to be examined and their impact
Predicted: 12,000 of product A and 8,000 of product B. Actual: 15,000 for product A and 7,000 for product B. The wholesale margin on product A is calculated to be $450 and on product B it is $350. The predicted sales mix is 12,000/20,000 = 60% of A to 40% of B. The actual sales mix is 15,000/22,000 = 68.2% of A to 31.8% of B. The sales mix variance for A is 15,000*(0.682% - 0.6%)*$450 = 553,500 or favorable variance. For B, the sales mix variance is 7,000*(0.318 - 0.4)*350 = -200,900 or unfavorable variance.
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