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CH 16 Workbook
CH 16 Workbook
CH 16 Workbook
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.
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
Sales Quantity
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
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
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
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
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
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