Description
Answer one question.
In January 2019, Emerald Ltd acquired Kilmala Ltd, a company which manufactures and sells electrical components.For many years, Kilmala Ltd was renowned for its experienced sales force, some of whom had been employed for by the company for over 20 years.The following data from July 2018 relates to the sales department which was responsible for distributing the three products manufactured by Kilmala Ltd, products A, B and C:
| Product A | Product B | Product C | |
| Budgeted selling price per unit | £10.00 | £12.00 | £18.00 |
| Budgeted sales units | 5,000 | 4,000 | 1,000 |
| Actual selling prices per unit | £9.50 | £10.80 | £16.20 |
| Actual sales units | 6,300 | 2,500 | 2,200 |
The following is a summary of the variable costs incurred/budgeted for July 2018:
| Product A | Product B | Product C | |
| Budgeted variable manufacturing cost per unit | £4.00 | £8.00 | £11.00 |
| Actual variable manufacturing cost per unit | £3.60 | £8.10 | £11.20 |
The company evaluated the performance of the sales department on the basis of the sales quantities and selling prices achieved.There is a proposal that staff would be paid a further bonus on the contribution of the products sold.
(a)Calculate:
- Sales price variance
- Sales volume variance
- Sales mix variance
- Sales quantity variance
(4)
(4)
(8)
(8)
(b)Comment on the results of the variance analysis calculated in part (a) and identify one possible reason for each of the variances calculated.
(6)
(c)Explain the factors that influence the decision to investigate a variance and describe the different methods that can be used to determine whether a variance should be investigated.
(5)
(35)
Explanation & Answer
heyhave a look at the attached completed file and let me know in case you may have any questions
QUESTION answer:
(a)
Calculate:
i)
Sales price variance
Product A: (9.50 – 10)*6300 = 3150
Product B: (10.80 – 12.00)*2500 = 3000
Product C: (16.20 – 18.00)*2200 = 3960
(4)
ii)
Sales volume variance
Product A: (3150 – 5000) * 10 = 18500
Product B: (3000-4000)*12 = 12000
Product C: (3960 – 1000)*18 = 53280
(4)
iii)
Sales mix variance
(Actual Sales Mix Ratio – Budget Sales Mix Ratio) * Actual Units Sold * Budget Contribution Margin Per
Product
Product A: 1...
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