Actual Mix Budgeted Mix

Kola 480,000 16% 400,000 16% 0.0%

Lima 900,000 30% 600,000 24% 6.0%
Oranga 1,620,000 54% 1,500,000 60% -6.0%
3,000,000 2,500,000

1) SALES MIX, SALES QUANTITY, & SALES VOLUME VARIANCE

Actual Sold Actual Sold Budget Sold
Actual Mix Sales Mix Budget Mix Sales Qty. Budget Mix
Budget CM Budget CM Budget CM

Kola 3,000,000 3,000,000 2,500,000

16% 16% 16%
$ 2.00 $ 2.00 $ 2.00
$ 960,000 $ 960,000 $ 800,000
Sales Mix $ - Sales Qty. $ 160,000
U F

Vol. Var. $ 160,000 F

Lima 3,000,000 3,000,000 2,500,000

30% 24% 24%
$ 1.20 $ 1.20 $ 1.20
$ 1,080,000 $ 864,000 $ 720,000
Sales Mix $ 216,000 Sales Qty $ 144,000
F F

Vol. Var. $ 360,000 F

Oranga 3,000,000 3,000,000 2,500,000

54% 60% 60%
$ 2.50 $ 2.50 $ 2.50
$ 4,050,000 $ 4,500,000 $ 3,750,000
Sales Mix $ 450,000 Sales Qty. $ 750,000
U F

Vol. Var. $ 300,000 F

Sales Mix Sales Vol. Sales Qty.

Total $ (234,000) $ 820,000 $ 1,054,000
U F F

2) INFERENCES
Total Quantity Variance is $1,054,000 Favorable because we sold 500,000 more
cases than expected

Total Mix Variance is $234,000 Unfavorable because we sold more Lima by 6% than
budget and it has a lower CM than Oranga which we sold 6% less of.

Total Volume Variance is $820,000 Favorable and is a combination of the mix and
Total Quantity Variance is $1,054,000 Favorable because we sold 500,000 more
cases than expected

Total Mix Variance is $234,000 Unfavorable because we sold more Lima by 6% than
budget and it has a lower CM than Oranga which we sold 6% less of.

Total Volume Variance is $820,000 Favorable and is a combination of the mix and
quantity variance

ADDITIONAL INFORMATION
Additional information:
PopStop prepared the budget for 2018 assuming a 10% market share based on total
sales in the western region of Canada. The total soft-drinks market was estimated to
reach sales of 25 million cases in the region. However, actual total sales volume in
the western region was 24 million cases.

Required:
Calculate the market-share and market-size variances for PopStop in 2018.
(Calculate all variances in terms of contribution margin.) Comment on the results.

Actual Size Actual Size Budget Size

Actual Share Market Share Budget Share Market Size Budget Share
Budget CM Budget CM Budget CM

24,000,000 24,000,000 25,000,000

12.5% 10% 10%
$ 2.108 $ 2.108 $ 2.108
$ 6,324,000 $ 5,059,200 $ 5,270,000
Market Share 1,264,800 Market Size 210,800
F U

Sales Qty. 1,054,000 F

Yes

Mix Wt. Bud. CM

Kola 16% $ 2.00 $ 0.32
Lima 24% $ 1.20 $ 0.29
Oranga 60% $ 2.50 $ 1.50
Total $ 2.11

COMMENT:
Market Share Variance of $1,264,800 Favorable is due to PopStop gaining 12.5%
market share which was 2.5% higher than budgeted.

Market Size Variance of $210,800 Unfavorable due to the overall market shrinking by
1,000,000 cases.
market share which was 2.5% higher than budgeted.

Market Size Variance of $210,800 Unfavorable due to the overall market shrinking by
1,000,000 cases.
None
F
U
 Actual Mix Budgeted Mix
Lower-tier 3300 30% 4500 45%
Upper-tier 7700 70% 5500 55%
Total 11000 10000

Flexible Budget Static Budget

Actual Total Sold Actual Total Sold Budget Total Sold
Actual Mix Budget Mix Budget Mix
Budgeted CM Budget CM Budget CM

Lower Tier 11000 11000 10000

30% 45% 45%
20 20 20
66000 99000 0 90000
Mix Variance 33000 Quantity Var. -9000
Unfavorable Favorable

Volume Var. 24000 Unfavorable

Upper Tier 11000 11000 10000

0.7 0.55 0.55
7 7 7
53900 42350 0 38500
Mix Variance -11550 Quantity Var. -3850
Favorable Favorable

Volume Var. -15400 Favorable

TOTAL Mix Variance 21450 Unfavorable

Quantity Variance -12850 Favorable
Volume Variance 8600 Unfavorable

Mix Variance More actual sales than budget

Quantity Variance Selling more upper-tier tickets which has a lower CM
Volume Variance Overall for the company
 Actual CM Amount Budget CM Amount
SlatePro 173 $ 2,138,280 198 $ 2,475,000
Slate 188 $ 7,939,240 172 $ 6,450,000
SlateLite 33 $ 1,597,530 77 $ 3,850,000
394 $ 11,675,050 447 $ 12,775,000

Actual Mix Budget Mix Volume

SlatePro 12,360 12% 12,500 12.50% (140) (27,720)
Slate 42,230 41% 37,500 37.50% 4,730 813,560
SlateLite 48,410 47% 50,000 50.00% (1,590) (122,430)
103,000 100,000 663,410

Actual Sold Actual Sold Budget Sold

Actual Mix Sales Mix Budget Mix Sales Qty. Budget Mix
Budget CM Budget CM Budget CM

Actual Mix Budget Mix Sales Mix

SlatePro 12,360 12% 12,500 12.50% -0.500% (101,970)
Slate 42,230 41% 37,500 37.50% 3.500% 620,060
SlateLite 48,410 47% 50,000 50.00% -3.000% (237,930)
103,000 100,000 280,160

Actual Mix Budget Mix Sales Qty

SlatePro 12,360 12% 12,500 12.50% 74,250
Slate 42,230 41% 37,500 37.50% 193,500
SlateLite 48,410 47% 50,000 50.00% 115,500
103,000 100,000 383,250

Actual Size Actual Size Budget Size

Actual Share Market Share Budget Share Market Size Budget Share
Budget CM Budget CM Budget CM

Sales Quantity

20% 25% 25%

 Budget Mix Budget CM Wt. Ave. CM
SlatePro 13,580 14% 187 $ 26
Slate 35,890 37% 180 $ 67
SlateLite 47,530 49% 73 $ 36
WAve. 97,000 $ 128.55
U
F
U
F

U
F
U
F
 Actual Mix Budget Mix
Chocolate 57,600 48% 45,000 45% 3% F
Oatmeal 18,000 15% 25,000 25% -10% U
Coconut 9,600 8% 10,000 10% -2% U
White 13,200 11% 5,000 5% 6% F
Macademia 21,600 18% 15,000 15% 3% F
120,000 100,000

SALES MIX, QUANTITY, AND VOLUME VARIANCE

Actual Sold. Actual Sold. Budget Sold.
Actual Mix Sales Mix Budget Mix Sales Qty. Budget Mix
Budget CM Budget CM Budget CM

Chocolate 120,000 120,000 100,000

48% 45% 45%
2 2 2
115,200 108,000 90,000
Sales Mix 7,200 Sales Qty. 18,000
F F

Sales Volume 25,200 F

Oatmeal 120,000 120,000 100,000

15% 25% 25%
2.3 2.3 2.3
41,400 69,000 57,500
Sales Mix 27,600 Sales Qty. 11,500
U F

Sales Volume 16,100 U

Coconut 120,000 120,000 100,000

8% 10% 10%
2.6 2.6 2.6
24,960 31,200 26,000
Sales Mix 6,240 Sales Qty. 5,200
U F

Sales Volume 1,040 U

White 120,000 120,000 100,000

11% 5% 5%
 3 3 3
39,600 18,000 15,000
Sales Mix 21,600 Sales Qty. 3,000
F F

Sales Volume 24,600 F

Macademia 120,000 120,000 100,000

18% 15% 15%
3.1 3.1 3.1
66,960 55,800 46,500
Sales Mix 11,160 Sales Qty. 9,300
F F

Sales Volume 20,460 F

Total
Sales Mix 6,120 F
Sales Qt. 47,000 F
Sales Volume 53,120 F

COMMENT
Total Quantity Variance of $47,000 Favorable because we sold 20,000 kgs. more
of cookies

Total Mix Variance of $6,120 Favorable because we sold a higher mix of high CM
cookies and a lower mix of low CM cookies

Total Volume Variance of $53,120 Favorable and was a composite of the mix and
quantity variance

ADDITIONAL INFORMATION
16-29
Additional information:
The total Ottawa market is expected to be 1,000,000 kilograms in sales volume for August
2018. The actual total Ottawa market for August 2018 was 960,000 kilograms in sales
volume.
Required:
Compute the market-share and market-size variances for Momma's Pan in August 2018.
Calculate all variances in contribution-margin terms. Comment on the results.
 Actual Size Actual Size Budget Size
Actual Share Market Share Budget Share Market Size Budget Share
Budget CM Budget CM Budget CM

960,000 960,000 1,000,000

12.50% 10% 10%
2.35 2.35 2.35
282,000 225,600 235,000
Market Share 56,400 Market Size 9,400
F U

Sales Qty. 47,000 F

Equal

Budget Mix Budget CM Wt. Ave. CM

Chocolate 45% 2 0.9
Oatmeal 25% 2.3 0.575
Coconut 10% 2.6 0.26
White 5% 3 0.15
Macademia 15% 3.1 0.465
Weighted Average CM 2.35

Market Size Variance of $9,400 Unfavorable because the market shrunk by 40,000
kgs.

Market Share Variance of $56,400 Favorable because our share increased by 2.5%
1) Customer-level Operating Income
1 2 3 4 5 6
Order Cost $ 42 $ 126 $ 420 $ 42 $ 336 $ 714 $ 210
Fitting Cost $ 30 $ 30 $ 180 $ - $ - $ 120 $ -
Rush Order Cost $ 90 $ - $ 180 $ 90 $ 180 $ 270 $ -
Returm Visit Cost $ 40 $ - $ - $ - $ - $ - $ 40
Customer-level Costs $ 156 $ 780 $ 132 $ 516 $ 1,104 $ 250

Revenue $ 850 $ 4,500 $ 280 $ 2,200 $ 5,500 $ 650

COGS $ 510 $ 2,700 $ 168 $ 1,320 $ 3,300 $ 390
Gross Profit $ 340 $ 1,800 $ 112 $ 880 $ 2,200 $ 260
Customer-level Costs $ 156 $ 780 $ 132 $ 516 $ 1,104 $ 250
Customer-level OI $ 184 $ 1,020 $ (20) $ 364 $ 1,096 $ 10
Customer-level % 21.65% 22.67% -7.14% 16.55% 19.93% 1.54%
Ranking 2nd 1st 6th 4th 3rd 5th

2)
Customer 3 is unprofitable
Customer 6 is barely profitable
1) SELLING PRICE
A) Stand-alone Method
BegM RCC Total
SP 60 40 100
Weight 0.6 0.4
Bundled Price 54 36 90

B) Incremental Method
BegM
Bundled Price 90
BegM Allocation 60
RCC Allocation 30

RCC
Bundled Price 90
RCC Allocation 40
BegM Allocation 50

C) Shapley Value Method

BegM
1st 60
2nd 50
Average 55

RCC
1st 40
2nd 30
Average 35

3) MOST APPROPRIATE?
Stand alone is more fair if demand for each product was equal
Incremental is more fair if demand is very different between products
Shapley typically gives an answer in between the two other methods
1) ALLOCATE REVENUE : BegM + RCC
a) Stand-alone method
BegM RCC Total
SP 65 35 100
Weight 0.65 0.35
Allocation $ 52.00 $ 28.00 80

b) Incremental method
BegM RCC
BegM - P 65 15 80
RCC - P 45 35 80

c) Shapley
BegM RCC
BegM - P 65 15
RCC - P 45 35
Total 110 50
2 2
55 25

2) ALLOCATE REVENUE : ConM + RCC

a) Stand-alone method
ConM RCC Total
SP 105 35 140
Weight 0.75 0.25
Allocation 90 30

b) Incremental method
ConM RCC
ConM - P 105 15 120
RCC - P 85 35 120

c) Shapley
ConM RCC
ConM - P 105 15
RCC - P 85 35
Total 190 50
2 2
95 25