Operational Performance Measurement: Further Analysis of Productivity and Sales

Chapter 16
Operational Performance Measurement: Further Analysis of Productivity and

Sales

Multiple Choice Questions

1. Which one of the following uses the number of units of an input factor in its assessment of productivity?

A. Partial financial productivity.

B. Total productivity.
C. Operational productivity.
D. Partial productivity.

2. Which one of the following is a productivity measure that focuses on the relationship between only one of
the inputs and the output attained?

A. Financial productivity.
C. Total financial productivity.
D. Productivity.
E. Partial productivity.

3. Which one of the following does not use the dollar amount of the input in assessing productivity?

D. Productivity.
E. Partial financial productivity.

4. Which one of the following measures the relationship between the output attained and the total input costs
of all the required input resources?


C. Partial operational productivity.
D. Total financial productivity.

5. Productivity can be thought of as:

A. The relationship between what is produced and the capacity to produce.

B. Doing more with less.
C. The ratio of output to input.
D. Throughput margin divided by output.

6. A primary objective in measuring productivity is to improve operations either by using fewer inputs to
produce the same output, or to produce:

A. More quickly.
B. More effectively.
C. With fewer constraints.
D. More outputs with the same inputs.
E. More outputs with more inputs.

7. A measure of productivity can be either:

A. Operational or financial.
B. Total or segmented.
C. Short-term or long-term.
D. Activity-based or TOC based.

8. A partial operational productivity measure:

A. Uses physical units in both the numerator and denominator.

B. Is harder to understand than a partial financial productivity measure.
C. Is affected by price changes and other factors.
D. Is a comprehensive productivity measure.
E. Has the advantage of considering the effects of both speed and quantity of a resources input on
productivity.

9. The experience of many firms is that decreases in labor costs may:

A. Decrease productivity.
B. Have no significant effect on productivity.
C. First increase, and then decrease productivity.
D. Increase productivity.
E. Restrict productivity improvements.

10. Efforts to improve productivity should be focused only on:

A. Quality.
B. Non-value-added activities.
C. Value-added activities.
D. Inputs.
E. Outputs.

11. One major problem in measuring the productivity of a service organization is the absence of:

A. Overhead costs.
B. A common measure for its outputs.
C. Mandatory financial reporting.
D. Materials costs.

12. A selling price variance is:

A. Further divided into separate sales quantity and sales mix variances.
B. Further divided into separate revenue and quantity variances.
C. Not further divided.
D. Further divided into separate flexible budget and sales volume variances.
E. Further divided into separate variable and fixed variances.

13. The sales volume variance is:


14. The two major contributing factors to a sales volume variance are deviations in:

A. Market size and market share.

B. Market size and sales quantity.
C. Sales mix and selling price.
D. Sales mix and sales quantity.
E. Sales price and sales quantity.

15. The sales mix variance for a firm is ultimately expressed in terms of:

A. Units.
B. Ratios.
C. Percentages.
D. Mixes.
E. Dollars.

16. An unfavorable sales mix variance arises for a product when the:

A. Actual units sold are greater than the budgeted units to be sold.
B. Actual units sold are less than the budgeted units to be sold.
C. Actual sales mix percentage is less than the budgeted sales mix percentage.
D. Budgeted sales mix percentage is less than the actual sales mix percentage.
E. Total actual sales dollar from the product is less than the budgeted sales dollar for the product.

17. When the actual sales-mix shifts toward a mix of products with lower contribution margins, there will be
negative effects on a firm's:

A. Sales mix and sales quantity variances.

B. Sales quantity and sales volume variances.
C. Sales volume and market mix variances.
D. Market mix and sales mix variance.
E. Sales mix and sales volume variances.

18. When the mix of products sold shifts toward the high contribution margin product, the total:

A. Sales mix variance is favorable.

B. Sales volume variance is favorable.
C. Market mix variance is favorable.
D. Sales mix variance is unfavorable.
E. Sales price variance is favorable.

19. The market size variance arises because of changes:

A. In the total market size of the firm's product.

B. In the firm's proportion in the total market.
C. In the number of firms in the market.
D. In the firm's total sales volume.

20. Decreasing selling prices in order to secure higher sales volumes or market shares:

A. Will always generate higher sales volumes and market shares.

B. Can have a negative impact on a firm's profitability.
C. Should not usually affect profitability.
D. Should not usually affect contribution margins.
E. Should not usually affect sales mix.

21. The sales quantity variance of a firm arises when the:

A. Mixes of individual products sold differ from the budgeted mixes to be sold.
B. Total units of all products sold differ from the budgeted total units to be sold.
C. Total units of a product sold differ from the budgeted units of the product to be sold.
D. Number of products sold differs from the budgeted number of products to be sold.
E. Actual market size differs from the budgeted market size.

22. A firm with a declining market share percentage may still earn a higher operating income if the:

A. Market as a whole is also declining.

B. Market as a whole is stable.
C. Market as a whole is shifting.
D. Market as a whole is growing.
E. Firm reduces operating costs.

23. The market share variance is:

A. (Budgeted contribution margin per unit - actual contribution margin per unit) × (units sold).
B. (Actual market size in units - budgeted market size in units) × (weighted-average budgeted contribution
margin per unit).
C. (Actual market size in units - budgeted market size in units) × (weighted-average budgeted contribution
margin per unit) × (the budgeted market share).
D. (Actual market share - budgeted market share) × (budgeted total market size) × (weighted average
budgeted contribution margin per unit).
E. (Actual market share - budgeted market share) × (actual total market size) × (weighted average budgeted
contribution margin per unit).

24. Weighted-average budgeted contribution margin per unit is:

A. Actual total contribution margin ÷ actual total units.

B. Actual total contribution margin ÷ budgeted total units.
C. Budgeted total contribution margin ÷ actual total units.
D. Budgeted total contribution margin ÷ budgeted total units.
E. Sum of budgeted contribution margin per unit of all products ÷ number of products.

25. (Units sold - budgeted sales units) × (Budgeted contribution margin per unit) equals:

A. Sales-mix variance.
B. Market size variance.
C. Sales quantity variance.
D. Sales volume variance.
E. Flexible budget variance.

26. Which one of the following is the result of the [(units sold) × (actual selling price per unit)] - [(units sold) ×
(budgeted selling price per unit)]:

A. Sales efficiency variance.

B. Sales quantity variance.
C. Selling price variance.
D. Sales mix variance.
E. Sales volume variance.

27. (Budgeted contribution margin per unit) × (units sold - units budgeted to be sold) × (budgeted sales mix of
the product) equals:


C. Sales price variance.

28. Which one of the following is a result of the difference between the actual sales mix and the budgeted sales
mix?



29. (Budgeted sales mixactual sales mix) × (total quantity sold) × (budgeted contribution margin per unit of
the product) equals:



30. The effect of changes in the total industry sales of the firm's product is measured by:

A. Market mix variance.

B. Market share variance.
C. Market price variance.
D. Market quantity variance.
E. Market size variance.

31. The effect of changes in a product's proportion of the total market are measured by:



32. Sales volume variances can have significant implications for strategic management. An unfavorable sales
volume variance may indicate that:

A. The industry is in decline.

B. The company needs a new competitive strategy.
C. Product mix changes are favorable but quantity variances are unfavorable.
D. Labor productivity needs to be addressed.

33. Darwin, Inc., provided the following information (round calculations to two significant digits):
Budgeted production 10,000 units

Actual production 9,500 units
Budgeted input 9,750 gallons
Actual input 8,950 gallons
What is the actual partial operational productivity ratio?

A. 0.97 unit per gallon.

B. 1.00 units per gallon.
C. 1.02 units per gallon.
D. 1.06 units per gallon.
E. 1.12 units per gallon.

34. Erwin Co. provided the following information for a selected production factor:

The actual partial operational productivity ratio of the production factor is (round to two significant digits):
A. 0.92 units per gallon.


35. Gutsen Communications Inc. manufactures a scrambling device for cellular phones. The main component
of the scrambling device is a very delicate part—DTV-12. DTV-12 requires careful handlings during
manufacturing. Once damaged, the part must be discarded. Only skilled laborers are hired to manufacture
and install DTV-12. Damages still occur, however. The following are the operating data of Gutsen
Communications Inc. for 2015 and 2016 relative to the insertion of DTV-12. Round calculations to two
significant digits.
2015 2016
Number of phones manufactured 600,000 780,000
Units of DTV-12 used 960,000 1,072,500
Direct labor hours for DTV-12 insertion 1,800 2,600
Total cost of DTV-12 units $1,443,750 $2,333,750
Direct labor wage rate per hour $67 $82
The partial operational productivity ratio of DTV-12 in 2015 is:

A. 0.63 per unit.

B. 0.73 per unit.
C. 1.92 per unit.
D. 3.00 per unit.
E. 3.33 per unit.

significant digits.
2015 2016
Units of DTV-12 used 960,000 1,072,500

A. 0.63 per unit.

B. 0.73 per unit.
C. 1.92 per unit.
D. 3.00 per unit.
E. 3.33 per unit.

significant digits.
2015 2016
Units of DTV-12 used 960,000 1,072,500
The partial direct labor operational productivity ratio for 2015 is:

A. 262 per unit.

B. 169 per unit.
C. 428 per unit.
D. 300 per unit.
E. 333 per unit.

significant digits.
2015 2016
Units of DTV-12 used 960,000 1,072,500

A. 262 per unit.

B. 169 per unit.
C. 428 per unit.
D. 300 per unit.
E. 333 per unit.

significant digits.
2015 2016
Units of DTV-12 used 960,000 1,072,500
The partial financial productivity ratio of DTV-12 in 2015 is:

A. 0.33.
B. 0.42.
C. 2.35.
D. 3.66.
E. 4.98.

significant digits.
2015 2016
Units of DTV-12 used 960,000 1,072,500

A. 0.33.
B. 0.42.
C. 2.35.
D. 3.66.
E. 4.98.

significant digits.
2015 2016
Units of DTV-12 used 960,000 1,072,500
The partial direct labor financial productivity ratio for 2015 is:

A. 0.33.
B. 0.42.
C. 2.35.
D. 3.66.
E. 4.98.

significant digits.
2015 2016
Units of DTV-12 used 960,000 1,072,500

A. 0.33.
B. 0.42.
C. 2.35.
D. 3.66.
E. 4.98.

43. Broha Company manufactured 1,500 units of its only product during 2016. The inputs for this production
are as follows:
450 pounds of Material A at a cost of $1.50 per pound

300 pounds of Material H at a cost of $2.75 per pound
300 direct labor hours at $20 per hour
The firm manufactured 1,800 units of the same product in 2015 with the following inputs:

Round all calculations to two significant digits.
In 2016, the partial operational productivity of Material A is:

A. 0.30.
B. 0.45.
C. 2.22.
D. 3.33.
E. 5.00.

are as follows:


In 2016, the partial operational productivity of Material H is:

A. 0.20.
B. 0.55.
C. 1.82.
D. 3.33.
E. 5.00.

are as follows:


In 2016, the partial direct labor operational productivity is:

A. 0.20.
B. 0.25.
C. 0.40.
D. 4.00.
E. 5.00.

are as follows:


In 2016, the partial financial productivity of Material A is:

A. .030.
B. .045.
C. 2.22.
D. 3.33.
E. 5.00.

are as follows:


In 2016, the partial financial productivity of Material H is:

A. 0.20.
B. 0.55.
C. 1.82.
D. 3.33.
E. 5.00.

are as follows:


In 2016, the partial financial productivity of direct labor is:

A. 0.20.
B. 0.25.
C. 0.40.
D. 4.00.
E. 5.00.

are as follows:


The total productivity ratio in 2016 is:

A. 0.20.
B. 0.70.
C. 1.00.
D. 1.43.
E. 5.00.

are as follows:


The partial operational productivity of Material A in 2015 is:

A. 0.28.
B. 0.33.
C. 3.00.
D. 3.33.
E. 3.60.

are as follows:


The partial operational productivity of Material H in 2015 is:

A. 0.20.
B. 0.50.
C. 2.00.
D. 5.00.
E. 6.00.

are as follows:


The partial direct labor operational productivity in 2015 is:

A. 0.22.
B. 0.25.
C. 4.00.
D. 4.50.
E. 5.00.

are as follows:



A. 0.28.
B. 0.33.
C. 3.00.
D. 3.33.
E. 3.60.

are as follows:



A. 0.20.
B. 0.50.
C. 2.00.
D. 5.00.
E. 6.00.

are as follows:



A. 0.22.
B. 0.25.
C. 4.00.
D. 4.50.
E. 5.00.

are as follows:



A. 0.15.
B. 0.21.
C. 0.70.
D. 1.43.
E. 4.83.

57. Creepers, Inc., manufactures stuffed spiders and mummies. During September the following information
was gathered:
Spiders Mummies
Units sold 6,900 3,100
Budgeted sales (units) 7,500 2,500
Contribution margin per unit:
Actual $3.75 $5.75
Budgeted $2.75 $5.25
What is the sales mix variance for Spiders?

A. $1,125 favorable.
B. $1,500 favorable.
C. $1,650 unfavorable.
D. $4,800 favorable.
E. $4,800 unfavorable.

was gathered:
Spiders Mummies
Actual $3.75 $5.75
What is the sales quantity variance for Spiders?

A. $0
C. $9,843 favorable.
E. $15,468 favorable.

was gathered:
Spiders Mummies
Actual $3.75 $5.75
What is the sales volume variance for Spiders?

A. $0.
D. $1,650 unfavorable.

60. Nappon Co. has two products named X and Y. The firm had the following master budget for the year just
completed:
Product X Product Y Total

Sales $260,000 360,000 $620,000
Variable Costs 156,000 180,000 336,000
Contribution Margin $104,000 $180,000 $284,000
Fixed Costs 130,000 108,000 238,000
Operating Income ($26,000) $72,000 $46,000
Selling Price per unit $130.00 $60.00
The following actual operating results were reported after the year was over:

Sales $202,500 $467,500 $670,000
Variable Costs 117,000 212,500 329,500
Fixed Costs 140,000 108,000 248,000
Units Sold 1,500 8,500
The contribution margin sales volume variance for Product X is:

A. $26,000 unfavorable.

completed:

Sales $260,000 360,000 $620,000
Variable Costs 156,000 180,000 336,000
Fixed Costs 130,000 108,000 238,000

Sales $202,500 $467,500 $670,000
Variable Costs 117,000 212,500 329,500
Fixed Costs 140,000 108,000 248,000
The selling price variance for Product × is:

B. $26,000 unfavorable.

completed:

Sales $260,000 360,000 $620,000
Variable Costs 156,000 180,000 336,000
Fixed Costs 130,000 108,000 238,000

Sales $202,500 $467,500 $670,000
Variable Costs 117,000 212,500 329,500
Fixed Costs 140,000 108,000 248,000
The sales quantity variance for Product X is:


completed:

Sales $260,000 360,000 $620,000
Variable Costs 156,000 180,000 336,000
Fixed Costs 130,000 108,000 238,000

Sales $202,500 $467,500 $670,000
Variable Costs 117,000 212,500 329,500
Fixed Costs 140,000 108,000 248,000
The contribution margin sales volume variance for Product Y is:


completed:

Sales $260,000 360,000 $620,000
Variable Costs 156,000 180,000 336,000
Fixed Costs 130,000 108,000 238,000

Sales $202,500 $467,500 $670,000
Variable Costs 117,000 212,500 329,500
Fixed Costs 140,000 108,000 248,000
The selling price variance for Product Y is:


completed:

Sales $260,000 360,000 $620,000
Variable Costs 156,000 180,000 336,000
Fixed Costs 130,000 108,000 238,000

Sales $202,500 $467,500 $670,000
Variable Costs 117,000 212,500 329,500
Fixed Costs 140,000 108,000 248,000
The sales quantity variance for Product Y is:


66. Winston Co. had two products code named X and Y. The firm had the following budget for August:

Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000
Operating Income $46,200 $193,600 $239,800
On September 1, the following actual operating results for August were reported:

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000
Total industry volume for both products X and Y was estimated to be 130,000 units at the time of the
budget. Actual industry volume for the period for products X and Y was 100,000 units.



Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000
The selling price variance for Product X is:

A. $0.


Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000
The sales mix variance for Product X is:



Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000



Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000



Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000



Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000
The sales mix variance for Product Y is:



Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000



Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000
The weighted-average budgeted contribution margin per unit is:

A. $19.95.
B. $35.50.
C. $30.60.
D. $40.00.
E. $77.50.


Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000
The firm's total sales quantity variance for the period is:



Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000
The firm's market share variance for the period is:



Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000
The firm's market size variance for the period is:


78. Folsom Fashions sells a line of women's dresses. The company uses flexible budgets to analyze its
performances. The firm's performance report for November is presented below:
Actual Budget
Dresses sold 5,000 6,000
Sales $235,000 $300,000
Variable costs 145,000 180,000
Contribution margin $90,000 $120,000
Fixed costs 84,000 80,000
Operating income $6,000 $40,000
The effect of the sales volume variance on November's contribution margin is:


Actual Budget
Sales $235,000 $300,000
The selling price variance for November is:


Actual Budget
Sales $235,000 $300,000
What additional information would be needed for Folsom to calculate the dollar impact of changes in
market share on November's operating income?

A. Folsom's budgeted market share and the budgeted total market size.
B. Folsom's budgeted market share, the budgeted total market size, and average market selling price.
C. Folsom's budgeted market share and the actual total market size.
D. Folsom's actual market share and the actual total market size.
E. There is no information that would make such a calculation possible.

81. Duo, Inc., carries two products and has the following year-end income statement (000s omitted):
Product AR-10 Product ZR-7

Budget Actual Budget Actual
Units 2,000 2,800 6,000 5,600
Sales $ $6,000 $7,560 $12,000 $11,760
Variable costs 2,400 2,800 6,000 5,880
Fixed Costs 1,800 1,900 2,400 2,400
Total Costs $4,200 $4,700 $8,400 $8,280
Operating income $1,800 $2,860 $3,600 $3,480
The net effect of AR-10's sales volume variance on profit is:

A. $720 favorable.
B. $817 favorable.


Units 2,000 2,800 6,000 5,600
Sales $ $6,000 $7,560 $12,000 $11,760
Variable costs 2,400 2,800 6,000 5,880
Fixed Costs 1,800 1,900 2,400 2,400
Total Costs $4,200 $4,700 $8,400 $8,280
The net effect of ZR-7's selling price variance on profit is:

A. $240 favorable.
B. $400 unfavorable.
C. $420 unfavorable.
D. $560 favorable.
E. $800 unfavorable.


Units 2,000 2,800 6,000 5,600
Sales $ $6,000 $7,560 $12,000 $11,760
Variable costs 2,400 2,800 6,000 5,880
Fixed Costs 1,800 1,900 2,400 2,400
Total Costs $4,200 $4,700 $8,400 $8,280
If products AR-10 and ZR-7 are substitutes for each other, a sales mix and sales volume variation for the
combined products can be calculated. If this combination is calculated, the net effect on profit of the change
in the unit sales mix is: (Round intermediate calculations to five significant digits, and your final answer to
the nearest whole dollar amount.)

A. $480 favorable.
B. $700 favorable.
C. $560 favorable.
D. $940 favorable.


Units 2,000 2,800 6,000 5,600
Sales $ $6,000 $7,560 $12,000 $11,760
Variable costs 2,400 2,800 6,000 5,880
Fixed Costs 1,800 1,900 2,400 2,400
Total Costs $4,200 $4,700 $8,400 $8,280
The sales quantity variance that would complement the variance calculated in the previous question is:

A. $480 favorable.
B. $507 favorable.
C. $560 favorable.
D. $960 favorable.

85. TV Timers, Inc., manufactures time control devices for TV's. The firm has the following operating data for
its operations in July:
Actual market size 10,000

Budgeted market size 11,250
Actual market share 34%
Budgeted market share 32%
Budgeted average contribution margin $6
Actual average contribution margin $5.25
What is the company's market share variance?


86. TV Timers, Inc., manufactures time control devices for TV's. The firm has the following operating data for
its operations in July:

What is the company's market size variance?


87. Jackson, Inc., manufactures two products that it sells to the same market. Excerpted below are its budgeted
and actual operating results for the year just completed:
Unit sales Budged Actual

Product X 22,500 42,000
Product Y 90,000 80,000
Unit contribution margin
Product X $4.80 $3.90
Product Y $13.00 $14.00
Unit selling price
Product X $13.00 $14.00
Product Y $30.00 $29.00
Industry volume was estimated to be 1,875,000 units at the time the budget was prepared. Actual industry
volume for the period was 2,440,000 units. Jackson measures variances using contribution margin.

A. $8.90.
B. $8.95.
C. $10.18.
D. $11.36.
E. $11.94.


Product X 22,500 42,000
Product Y 90,000 80,000
Product X $4.80 $3.90
Product Y $13.00 $14.00
Unit selling price
Product X $13.00 $14.00
Product Y $30.00 $29.00
The market share variance is:



Product X 22,500 42,000
Product Y 90,000 80,000
Product X $4.80 $3.90
Product Y $13.00 $14.00
Unit selling price
Product X $13.00 $14.00
Product Y $30.00 $29.00
The market size variance is:



Product X 22,500 42,000
Product Y 90,000 80,000
Product X $4.80 $3.90
Product Y $13.00 $14.00
Unit selling price
Product X $13.00 $14.00
Product Y $30.00 $29.00
Total sales quantity variance is:



Product X 22,500 42,000
Product Y 90,000 80,000
Product X $4.80 $3.90
Product Y $13.00 $14.00
Unit selling price
Product X $13.00 $14.00
Product Y $30.00 $29.00
If fixed costs are budgeted for $500,000 and are actually $500,000, what is the difference between
budgeted and actual operating income?



Product X 22,500 42,000
Product Y 90,000 80,000
Product X $4.80 $3.90
Product Y $13.00 $14.00
Unit selling price
Product X $13.00 $14.00
Product Y $30.00 $29.00
The total contribution margin sales volume variance of the period is:



Product X 22,500 42,000
Product Y 90,000 80,000
Product X $4.80 $3.90
Product Y $13.00 $14.00
Unit selling price
Product X $13.00 $14.00
Product Y $30.00 $29.00
The total selling price variance of the period is:

A. $0.

94. Hollaway Corp. has the following data for the current fiscal year:
Actual Budget
Sales Units
Product X 20,000 90,000
Product Y 140,000 110,000
Total 160,000 200,000
Contribution Margin
Product X $9.00 $8.00
Product Y $6.00 $5.00
The total sales mix variance for both products is:


Actual Budget
Sales Units
Product X 20,000 90,000
Product Y 140,000 110,000
Total 160,000 200,000
Contribution Margin
Product X $9.00 $8.00
Product Y $6.00 $5.00
The total sales quantity variance for both products is:


Actual Budget
Sales Units
Product X 20,000 90,000
Product Y 140,000 110,000
Total 160,000 200,000
Contribution Margin
Product X $9.00 $8.00
Product Y $6.00 $5.00

A. $5.15.
B. $6.35.
C. $6.70.
D. $6.80.
E. $7.00.

Actual Budget
Sales Units
Product X 20,000 90,000
Product Y 140,000 110,000
Total 160,000 200,000
Contribution Margin
Product X $9.00 $8.00
Product Y $6.00 $5.00
The contribution margin sales volume variance is:


98. Gourmet Aroma Coffee House has an exclusive contract with Columbia exporters. Two brands of gourmet
coffee are imported, Morning Thunder (MT) and Evening Tender (ET). The following data are provided for
the current fiscal year:
Budgeted Operating Results

MT ET MT ET
Price per pound $40 $60 $50 $56
Variable cost per pound 20 36 24 40
Sales (in pounds) 4,000 4,000 3,960 5,040
The total market was estimated to be 80,000 pounds at the time of budget. The actual total market for the
year is 75,000 pounds.
What is ET's contribution margin sales volume variance?


coffee are imported, Morning Thunder (MT) and Evening Tender (ET). The following data are provided for
the current fiscal year:

MT ET MT ET
Sales (in pounds) 4,000 4,000 3,960 5,040
What is MT's contribution margin sales volume variance?

A. $800 unfavorable.

coffee are imported, Morning Thunder (MT) and Evening Tender (ET). The following data are provided
for the current fiscal year:

MT ET MT ET
Sales (in pounds) 4,000 4,000 3,960 5,040
What is the total contribution margin sales volume variance?



MT ET MT ET
Sales (in pounds) 4,000 4,000 3,960 5,040
What is MT's sales mix variance?



MT ET MT ET
Sales (in pounds) 4,000 4,000 3,960 5,040
What is ET's sales mix variance?



MT ET MT ET
Sales (in pounds) 4,000 4,000 3,960 5,040
What is the firm's total sales mix variance?



MT ET MT ET
Sales (in pounds) 4,000 4,000 3,960 5,040
What is MT's sales quantity variance?



MT ET MT ET
Sales (in pounds) 4,000 4,000 3,960 5,040
What is ET's sales quantity variance?



MT ET MT ET
Sales (in pounds) 4,000 4,000 3,960 5,040
What is the firm's total sales quantity variance?



MT ET MT ET
Sales (in pounds) 4,000 4,000 3,960 5,040
What is the firm's market share variance?



MT ET MT ET
Sales (in pounds) 4,000 4,000 3,960 5,040
What is the firm's market size variance?


109. Twitter Company manufactures a remote control device for home theaters. The following data were from
the operating period just completed:
Actual market size (units) 12,000

Budgeted market size (units) 11,000
Budgeted selling price per unit $60
Actual selling price per unit $55
Budgeted variable cost per unit $30
Actual variable cost per unit $18


110. Twitter Company manufactures a remote control device for home theaters. The following data were from
the operating period just completed:



111. Wheat Inc. has an exclusive contract with an exporter. Two brands of wheat are imported, labeled AB and
CD. The following data are provided for the current fiscal year:
Budgeted Actual Results

AB CD AB CD
Price per bushel $20 $10 $25 $12
Variable cost per bushel $15 $5 $15 $8
Sales (in bushels) 1,500 2,500 1,200 3,600
The total market was estimated to 40,000 bushels at the time of budget. The actual total market for the
year is 32,000 bushels.
What is AB's contribution margin sales volume variance?

A. $0.


AB CD AB CD
Sales (in bushels) 1,500 2,500 1,200 3,600
What is CD's contribution margin sales volume variance?

A. $500 favorable.


AB CD AB CD
Sales (in bushels) 1,500 2,500 1,200 3,600

A. $0.


AB CD AB CD
Sales (in bushels) 1,500 2,500 1,200 3,600

A. $0.
B. $500 favorable.
D. $3.000 favorable.


AB CD AB CD
Sales (in bushels) 1,500 2,500 1,200 3,600

A. $0.


AB CD AB CD
Sales (in bushels) 1,500 2,500 1,200 3,600

A. $0.
B. $560 favorable.


AB CD AB CD
Sales (in bushels) 1,500 2,500 1,200 3,600

E. $0.

118. Which of the following is not a key determinant of productivity for most organizations?

A. Control of waste.
B. Product and manufacturing process innovation.
C. Control of overhead costs.
D. Fluctuations in demand.

119. Which of the following is a total productivity measure?

A. Units of output per dollar value of input.

B. Units of output per units of materials.
C. Units of output per labor hour.
D. Units of output per machine hour.

120. A firm manufactures 5,000 umbrellas per year. The umbrellas cost $25,000 to manufacture. The firm has
an annual overhead cost of $5,000. What is the total productivity of manufacturing umbrellas?

A. 0.20 umbrellas/dollar
B. 0.20 dollars/umbrella
C. 5 umbrellas/dollar
D. 0.17 dollars/umbrella

121. Which of the following is not an element of a product's sales quantity variance?

A. Budgeted sales mix ratio for the product.

B. Budgeted contribution margin per unit of the product.
C. Difference in total units of all products between the actual units sold and the units budgeted to be sold.
D. Actual sales mix ratio.

122. Which of the following is not a part of the sales mix variance equation?

A. Actual sales mix of the product.

B. Budgeted sales mix of the product.
C. Actual contribution margin per unit of the product.
D. Total units sold.

123. The market share variance measures the effect of the difference in market shares on the firm's total
contribution margin and:

A. Net income.
B. Operating income.
C. Investment income.
D. Total sales.

Essay Questions

124. Julie Hilger started New Treads to combine fashion and sustainability. The original production of sandals
made from recycled plastic has expanded to a complete line of casual footwear. Current sales total over $2
million. Julie hired the firm's first controller early this year, and has asked him to detail suggestions for
ways to increase profits. Adrian Warring, the new controller, has compiled a list of recommended changes
that focus on quality improvements. New Treads customers expect high quality at a low price, a "value"
product. So the company must simultaneously watch costs and quality. After receiving his list of
suggestions, Julie calls Adrian to her office and says, "I don't see how improving quality can increase
productivity. In fact, it seems to me that efforts to improve quality will slow down production and decrease
productivity."
Required:
Using specific examples, help Adrian explain to Julie why efforts to improve quality can also boost
productivity. How does productivity play a role in the firm's strategy and competitive environment?

125. Dr. Howard Abelson is the director of the Wellness House, a residential center for recovering alcoholics. A
typical patient spends 3-4 weeks in an intensive program of rehabilitation. The Wellness House has a staff
of 45, including 12 certified therapists, to serve an average patient load of 15. Howard Abelson is
attempting to develop some productivity measures for the center, but is not aware of the limitations of
productivity measurement in not-for-profit organizations. You have been called in as a consultant to help
develop appropriate productivity measures.
Required:
(a) Identify any major differences/limitations you face in developing performance measures for the
Wellness House.
(b) Recommend two or three overall measures of productivity that are appropriate for the Wellness House
as a not-for-profit organization.

126. Paquindo Co. has two products: X and Y. The firm had the following budget and operating results for the
period just ended. The budgeted total industry sales for both products was 324,800 units and the actual
industry sales was 350,000.
Master Budget
Sales $324,800 $426,300 $751,100
Variable costs 194,880 213,150 408,030
Contribution margin 129,920 213,150 $343,070
Fixed costs 162,000 130,000 292,000
Operating income ($32,080) $83,150 $51,070
Selling price per unit $160 $70
Operating Results Product X Product Y Total
Sales $365,400 $457,500 $822,900
Variable costs 243,600 201,300 444,900
Contribution margin 121,800 256,200 378,000
Fixed costs 163,000 130,000 293,000
Required:
(A) Calculate the contribution margin sales volume variance for Product X.
(B) Calculate the contribution margin sales volume variance for Product Y.
(C) Calculate the sales mix variance for Product X.
(D) Calculate the sales quantity variance for Product X.
(E) Calculate the sales mix variance for Product Y.
(F) Calculate the sales quantity variance for Product Y.
(G) Calculate the market share variance for both products.
(H) Calculate the market size variance for both products.

127. Zeller Company had two products named Q and R. The firm had the following budget for the period just
ended:
Master Budget
Product Q Product R Total
Sales $100,000 $150,000 $250,000
Variable costs 75,000 127,500 202,500
Fixed costs 10,000 8,000 18,000
Operating income $15,000 $14,500 $29,500
Operating Results
Actual Results Product Q Product R Total
Sales $110,000 $168,000 $278,000
Variable costs 82,500 112,000 194,500
Fixed costs 10,000 8,000 18,000
Required:
(A) Calculate the contribution margin sales volume variance for Product Q.
(B) Calculate the contribution margin sales volume variance for Product R.
(C) Calculate the sales mix variance for Product Q.
(D) Calculate the sales quantity variance for Product Q.
(E) Calculate the sales mix variance for Product R.
(F) Calculate the sales quantity variance for Product R.

128. The following information is for the Wetherby Company.
2016 2015
Units manufactured 60,000 54,000
Units of materials used 144,000 124,000
Number of labor hours used 200,000 180,000
Cost of materials per unit $40 $38
1. Compute the partial operational productivity measures for 2015 and 2016.
2. Compute the partial financial productivity ratios for 2015 and 2016.
3. Separate the changes of the partial financial productivity ratios from 2015 to 2016 into productivity
change, input price change, and output change.

129. The Tempest Company has the following information for the current year.
Actual Budget
Sales Units
Product X 22,000 20,000
Product Y 33,000 30,000
Total 55,000 50,000
Sales Mix for each Product
Product X 40.0% 40.0%
Product Y 60.0% 60.0%
Price
Product X $22.00 $20.00
Product Y $35.00 $30.00
Variable Cost per Unit
Product X $15.00 $14.00
Product Y $16.00 $18.00
The industry budget is 2 million units and the actual result for the industry is 2.5 million units.
Required:
1. Compute the contribution margin sales mix variance for product X.

2. Compute the contribution margin sales mix variance for product Y.
3. Compute the contribution margin sales volume variance for product X.
4. Compute the contribution margin sales volume variance for product Y.
5. Compute the contribution margin sales quantity variance for product X.
6. Compute the contribution margin sales quantity variance for product Y.
7. Compute the market share variance for Tempest.
8. Computer the market size variance for Tempest.

130. Taylor, Inc., has the following information for the two most recent years of operations.
2016 2015
Sales Units 33,000 40,000
Price $30.00 $33.00
Materials cost per pound $15.00 $18.00
Pounds of material required per unit 0.75 1.00
Labor hours required per unit 1.80 2.00
Wage rate per hour $9.00 $10.00
Contribution margin $2.55 ($5.00)
Required:
Determine the following:
1. Selling price variance in sales dollars.

2. Sales volume variance in contribution.
3. Materials usage variance.
4. Materials price variance.
5. Labor usage variance.
6. Labor rate variance.

131. In early 2006, the new CEO of Hewlett-Packard (H-P), Mark Hurd, became aware of a number of customer
complaints about the accessibility of sales support at the company. The complaints referred to a confusing
management structure and lack of contact with sales support personnel from H-P. There were 17,000
people working in H-P sales, and customers, particularly the large corporate customers, were frustrated
dealing with the complexity of the H-P sales system.
Required:
What would you propose to Mark Hurd, the CEO at H-P, regarding an overhaul of the sales support
systems at H-P?

132. Triple Delight is a food stand located on a busy corner in the local business district. On average it sells
three cheeseburgers and one fishwich for every four hamburgers sold. The following data were culled from
its operation for 2016:
Total operating income variance

Hamburger $18,000 Unfavorable
Cheeseburger 50,000 Favorable
Fishwich 10,000 Unfavorable
Sales quantity variance
Hamburger 14,000 Favorable
Fishwich 1,000 Favorable
Sales mix variance
Hamburger 2,240 Unfavorable
Cheeseburger 4,800 Unfavorable
Fixed costs variances 0
Market share variance $96,000 Unfavorable
Market share variance 126,000 Favorable
Change in market share 4%
Fixed cost flexible budget variance 0
The estimated total volume for the food stands in the region was 2,500,000 units. Consistent good weather
pushed the total volume for the year to 4,000,000.
Required:
1. Budgeted weighted-average contribution margin.

2. Budgeted and actual market shares.
3. Budget and actual total units sold.
4. Sales quantity variances for fishwich.
5. Budgeted contribution margin of each product.
6. Actual sales mix of each product.
7. Budget and actual units sold for each product.

133. Lau & Lau, Ltd. of Hong Kong manufacture two products for the same market. Its budget and operating
results for the year just completed follow:
Budget Actual
Unit of sales
Product A 30,000 35,000
Product B 60,000 65,000
Contribution margin per unit
Product A $4.00 $3.00
Product B 10.00 12.00
Selling price per unit
Product A $10.00 $12.00
Product B 25.00 24.00
At the time of budget preparation, the budgeting department and sales department agreed that the industry
volume for the year would likely be 1,500,000 units. Actual industry volume turned out to be 2,000,000
units.
Required:
(you may round fractions to three decimal places)
1. What is the average budgeted contribution margin per unit?

2. What is the sales volume contribution margin variance for each product?
3. What is the sales mix contribution margin variance for each product?
4. What is the sales quantity contribution margin variance for each product?
5. What is the market size contribution margin variance?
6. What is the market share contribution margin variance?
7. What is the total flexible budget contribution margin variance?
8. What is the total variable cost price variance if the total contribution margin price variance is $50,000
favorable?
9. What is the total variable cost efficiency variance if the total contribution margin price variance is
$50,000 favorable?

134. Showtime is a group of aspiring musicians and actors who perform in theaters and dinner clubs. It has a
matinee and evening show. These operating data pertain to the month of July:
Master budget data

Total number of shows 100 (evening 70; matinee 30)
Contribution margin per show:
Matinee $240
Evening $600
Actual operating results
Number of shows 90 (36 evening, 54 matinee)
Required:
1. Calculate each variance by individual type of show and also show the combined total of each variance
for both types of shows:
a. Sales mix variances.

b. Sales quantity variances.
c. Sales volume variances.
2. What strategic implications can you draw from the variances?

Chapter 16 Operational Performance Measurement: Further Analysis of
Productivity and Sales Answer Key

Multiple Choice Questions

1. Which one of the following uses the number of units of an input factor in its assessment of
productivity?


D. Partial productivity.

AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-02 Calculate and interpret the measures for total productivity, partial operational productivity, and partial
financial productivity.
Topic: Identify the Productivity Measure
Topic: Productivity Measure

2. Which one of the following is a productivity measure that focuses on the relationship between only one
of the inputs and the output attained?


C. Total financial productivity.
D. Productivity.

Blooms: Remember
Difficulty: 1 Easy
Topic: Analyzing Productivity
Topic: Identify the Type of Productivity Measure

3. Which one of the following does not use the dollar amount of the input in assessing productivity?


D. Productivity.
E. Partial financial productivity.

Blooms: Remember
Difficulty: 1 Easy

4. Which one of the following measures the relationship between the output attained and the total input
costs of all the required input resources?


C. Partial operational productivity.
D. Total financial productivity.

Blooms: Remember
Difficulty: 1 Easy

5. Productivity can be thought of as:

A. The relationship between what is produced and the capacity to produce.
B. Doing more with less.
C. The ratio of output to input.
D. Throughput margin divided by output.

Blooms: Understand
Difficulty: 2 Medium

6. A primary objective in measuring productivity is to improve operations either by using fewer inputs to
produce the same output, or to produce:

A. More quickly.

B. More effectively.
C. With fewer constraints.
D. More outputs with the same inputs.
E. More outputs with more inputs.

AACSB: Analytical Thinking
Blooms: Analyze
Learning Objective: 16-01 Explain the strategic role of the flexible budget in analyzing productivity and sales.
Topic: Strategic Sales and Productivity Analysis

7. A measure of productivity can be either:

A. Operational or financial.

B. Total or segmented.
C. Short-term or long-term.
D. Activity-based or TOC based.

Blooms: Remember
Difficulty: 1 Easy

8. A partial operational productivity measure:

A. Uses physical units in both the numerator and denominator.

B. Is harder to understand than a partial financial productivity measure.
C. Is affected by price changes and other factors.
D. Is a comprehensive productivity measure.
E. Has the advantage of considering the effects of both speed and quantity of a resources input on
productivity.

Blooms: Remember

9. The experience of many firms is that decreases in labor costs may:

A. Decrease productivity.

B. Have no significant effect on productivity.
C. First increase, and then decrease productivity.
D. Increase productivity.
E. Restrict productivity improvements.

Blooms: Analyze

10. Efforts to improve productivity should be focused only on:

A. Quality.
B. Non-value-added activities.
C. Value-added activities.
D. Inputs.
E. Outputs.

Blooms: Analyze

11. One major problem in measuring the productivity of a service organization is the absence of:

A. Overhead costs.

B. A common measure for its outputs.
C. Mandatory financial reporting.
D. Materials costs.

Blooms: Understand
Text Feature: Service

12. A selling price variance is:


Blooms: Remember
Learning Objective: 16-03 Use the flexible budget to calculate and interpret the sales quantity, sales mix, market size, and market share
variances.
Topic: Variance

13. The sales volume variance is:


Blooms: Remember
variances.
Topic: Analyzing Sales
Topic: Variance

14. The two major contributing factors to a sales volume variance are deviations in:

A. Market size and market share.

B. Market size and sales quantity.
C. Sales mix and selling price.
D. Sales mix and sales quantity.
E. Sales price and sales quantity.

Blooms: Remember
variances.
Topic: Variance

15. The sales mix variance for a firm is ultimately expressed in terms of:

A. Units.
B. Ratios.
C. Percentages.
D. Mixes.
E. Dollars.

Blooms: Understand
Difficulty: 1 Easy
variances.
Topic: Variance

16. An unfavorable sales mix variance arises for a product when the:

A. Actual units sold are greater than the budgeted units to be sold.
B. Actual units sold are less than the budgeted units to be sold.
C. Actual sales mix percentage is less than the budgeted sales mix percentage.
D. Budgeted sales mix percentage is less than the actual sales mix percentage.
E. Total actual sales dollar from the product is less than the budgeted sales dollar for the product.

Blooms: Analyze
variances.
Topic: Variance

17. When the actual sales-mix shifts toward a mix of products with lower contribution margins, there will
be negative effects on a firm's:

A. Sales mix and sales quantity variances.

B. Sales quantity and sales volume variances.
C. Sales volume and market mix variances.
D. Market mix and sales mix variance.
E. Sales mix and sales volume variances.

Blooms: Analyze
Difficulty: 3 Hard
variances.
Topic: Identify the Type of Variance
Topic: Variance

18. When the mix of products sold shifts toward the high contribution margin product, the total:

A. Sales mix variance is favorable.

B. Sales volume variance is favorable.
C. Market mix variance is favorable.
D. Sales mix variance is unfavorable.
E. Sales price variance is favorable.

Blooms: Analyze
Difficulty: 3 Hard
variances.
Topic: Variance

19. The market size variance arises because of changes:

A. In the total market size of the firm's product.

B. In the firm's proportion in the total market.
C. In the number of firms in the market.
D. In the firm's total sales volume.

Blooms: Understand
variances.
Topic: Variance

20. Decreasing selling prices in order to secure higher sales volumes or market shares:

A. Will always generate higher sales volumes and market shares.
B. Can have a negative impact on a firm's profitability.
C. Should not usually affect profitability.
D. Should not usually affect contribution margins.
E. Should not usually affect sales mix.

Blooms: Analyze
Difficulty: 3 Hard
variances.

21. The sales quantity variance of a firm arises when the:

A. Mixes of individual products sold differ from the budgeted mixes to be sold.
B. Total units of all products sold differ from the budgeted total units to be sold.
C. Total units of a product sold differ from the budgeted units of the product to be sold.
D. Number of products sold differs from the budgeted number of products to be sold.
E. Actual market size differs from the budgeted market size.

Blooms: Understand
Difficulty: 1 Easy
variances.
Topic: Variance

22. A firm with a declining market share percentage may still earn a higher operating income if the:

A. Market as a whole is also declining.

B. Market as a whole is stable.
C. Market as a whole is shifting.
D. Market as a whole is growing.
E. Firm reduces operating costs.

Blooms: Understand
variances.

23. The market share variance is:

A. (Budgeted contribution margin per unit - actual contribution margin per unit) × (units sold).
B. (Actual market size in units - budgeted market size in units) × (weighted-average budgeted
contribution margin per unit).
C. (Actual market size in units - budgeted market size in units) × (weighted-average budgeted
contribution margin per unit) × (the budgeted market share).
D. (Actual market share - budgeted market share) × (budgeted total market size) × (weighted average
E. (Actual market share - budgeted market share) × (actual total market size) × (weighted average

Blooms: Remember
Difficulty: 1 Easy
variances.
Topic: Variance

24. Weighted-average budgeted contribution margin per unit is:

A. Actual total contribution margin ÷ actual total units.

B. Actual total contribution margin ÷ budgeted total units.
C. Budgeted total contribution margin ÷ actual total units.
D. Budgeted total contribution margin ÷ budgeted total units.
E. Sum of budgeted contribution margin per unit of all products ÷ number of products.

Blooms: Remember
variances.

25. (Units sold - budgeted sales units) × (Budgeted contribution margin per unit) equals:

A. Sales-mix variance.

B. Market size variance.
C. Sales quantity variance.
D. Sales volume variance.
E. Flexible budget variance.

Blooms: Remember
variances.
Topic: Variance

26. Which one of the following is the result of the [(units sold) × (actual selling price per unit)] - [(units
sold) × (budgeted selling price per unit)]:


C. Selling price variance.

Blooms: Remember
variances.
Topic: Variance

27. (Budgeted contribution margin per unit) × (units sold - units budgeted to be sold) × (budgeted sales mix
of the product) equals:



Blooms: Remember
Difficulty: 3 Hard
variances.
Topic: Variance

28. Which one of the following is a result of the difference between the actual sales mix and the budgeted
sales mix?



Blooms: Remember
Difficulty: 1 Easy
variances.
Topic: Variance

29. (Budgeted sales mixactual sales mix) × (total quantity sold) × (budgeted contribution margin per unit
of the product) equals:



Blooms: Remember
variances.
Topic: Variance

30. The effect of changes in the total industry sales of the firm's product is measured by:



Blooms: Understand
variances.
Topic: Variance

31. The effect of changes in a product's proportion of the total market are measured by:



Blooms: Understand
Difficulty: 1 Easy
variances.
Topic: Variance

32. Sales volume variances can have significant implications for strategic management. An unfavorable
sales volume variance may indicate that:

A. The industry is in decline.

B. The company needs a new competitive strategy.
C. Product mix changes are favorable but quantity variances are unfavorable.
D. Labor productivity needs to be addressed.

Blooms: Analyze
variances.
Text Feature: Strategy
Topic: Variance

33. Darwin, Inc., provided the following information (round calculations to two significant digits):

What is the actual partial operational productivity ratio?

A. 0.97 unit per gallon.

1.06 = 9,500 ÷ 8,950

AACSB: Knowledge Application
Blooms: Apply
Difficulty: 1 Easy

34. Erwin Co. provided the following information for a selected production factor:

The actual partial operational productivity ratio of the production factor is (round to two significant
digits):

A. 0.92 units per gallon.

1.02 = 11,000 ÷ 10,800

Blooms: Apply
Difficulty: 1 Easy

35. Gutsen Communications Inc. manufactures a scrambling device for cellular phones. The main
component of the scrambling device is a very delicate part—DTV-12. DTV-12 requires careful
handlings during manufacturing. Once damaged, the part must be discarded. Only skilled laborers are
hired to manufacture and install DTV-12. Damages still occur, however. The following are the
operating data of Gutsen Communications Inc. for 2015 and 2016 relative to the insertion of DTV-12.
Round calculations to two significant digits.
2015 2016
Units of DTV-12 used 960,000 1,072,500

A. 0.63 per unit.

B. 0.73 per unit.
C. 1.92 per unit.
D. 3.00 per unit.
E. 3.33 per unit.
0.63 = 600,000 ÷ 960,000

Blooms: Apply
Difficulty: 1 Easy

2015 2016
Units of DTV-12 used 960,000 1,072,500

A. 0.63 per unit.

B. 0.73 per unit.
C. 1.92 per unit.
D. 3.00 per unit.
E. 3.33 per unit.
0.73 = 780,000 ÷ 1,072,500

Blooms: Apply
Difficulty: 1 Easy

2015 2016
Units of DTV-12 used 960,000 1,072,500

A. 262 per unit.

B. 169 per unit.
C. 428 per unit.
D. 300 per unit.
E. 333 per unit.
333 = 600,000 ÷ 1,800

Blooms: Apply
Difficulty: 1 Easy

2015 2016
Units of DTV-12 used 960,000 1,072,500

A. 262 per unit.

B. 169 per unit.
C. 428 per unit.
D. 300 per unit.
E. 333 per unit.
300 = 780,000 ÷ 2,600

Blooms: Apply
Difficulty: 1 Easy

2015 2016
Units of DTV-12 used 960,000 1,072,500

A. 0.33.
B. 0.42.
C. 2.35.
D. 3.66.
E. 4.98.
0.42 = 600,000 ÷ $1,443,750

Blooms: Apply
Difficulty: 1 Easy

2015 2016
Units of DTV-12 used 960,000 1,072,500

A. 0.33.
B. 0.42.
C. 2.35.
D. 3.66.
E. 4.98.
0.33 = 780,000 ÷ $2,333,750

Blooms: Apply
Difficulty: 1 Easy

2015 2016
Units of DTV-12 used 960,000 1,072,500

A. 0.33.
B. 0.42.
C. 2.35.
D. 3.66.
E. 4.98.
4.98 = 600,000 ÷ (1,800 × $67)

Blooms: Apply

2015 2016
Units of DTV-12 used 960,000 1,072,500

A. 0.33.
B. 0.42.
C. 2.35.
D. 3.66.
E. 4.98.
3.66 = 780,000 ÷ ($82 × 2,600)

Blooms: Apply

43. Broha Company manufactured 1,500 units of its only product during 2016. The inputs for this
production are as follows:


In 2016, the partial operational productivity of Material A is:

A. 0.30.
B. 0.45.
C. 2.22.
D. 3.33.
E. 5.00.
1,500 ÷ 450 = 3.33

Blooms: Apply
Difficulty: 1 Easy



In 2016, the partial operational productivity of Material H is:

A. 0.20.
B. 0.55.
C. 1.82.
D. 3.33.
E. 5.00.
1,500 ÷ 300 = 5.00

Blooms: Apply
Difficulty: 1 Easy



In 2016, the partial direct labor operational productivity is:

A. 0.20.
B. 0.25.
C. 0.40.
D. 4.00.
E. 5.00.
5.0 = 1,500 ÷ 300

Blooms: Apply
Difficulty: 1 Easy




A. .030.
B. .045.
C. 2.22.
D. 3.33.
E. 5.00.
2.22 = 1,500 ÷ (450 × $1.50)

Blooms: Apply




A. 0.20.
B. 0.55.
C. 1.82.
D. 3.33.
E. 5.00.
1.82 = 1,500 ÷ (300 × $2.75)

Blooms: Apply




A. 0.20.
B. 0.25.
C. 0.40.
D. 4.00.
E. 5.00.
0.25 = 1,500 ÷ (300 × $20)

Blooms: Apply




A. 0.20.
B. 0.70.
C. 1.00.
D. 1.43.
E. 5.00.
0.20 = 1,500 ÷ [(450 × $1.5) + (300 × $2.75) + (300 × $20)]

Blooms: Apply



The partial operational productivity of Material A in 2015 is:

A. 0.28.
B. 0.33.
C. 3.00.
D. 3.33.
E. 3.60.
3.6 = 1,800 ÷ 500

Blooms: Apply
Difficulty: 1 Easy



The partial operational productivity of Material H in 2015 is:

A. 0.20.
B. 0.50.
C. 2.00.
D. 5.00.
E. 6.00.
5.0 = 1,800 ÷ 360

Blooms: Apply
Difficulty: 1 Easy



The partial direct labor operational productivity in 2015 is:

A. 0.22.
B. 0.25.
C. 4.00.
D. 4.50.
E. 5.00.
4.5 = 1,800 ÷ 400

Blooms: Apply
Difficulty: 1 Easy




A. 0.28.
B. 0.33.
C. 3.00.
D. 3.33.
E. 3.60.
3.0 = 1,800 ÷ (500 × $1.20)

Blooms: Apply
Difficulty: 1 Easy




A. 0.20.
B. 0.50.
C. 2.00.
D. 5.00.
E. 6.00.
2.0 = 1,800 ÷ (360 × $2.50)

Blooms: Apply
Difficulty: 1 Easy




A. 0.22.
B. 0.25.
C. 4.00.
D. 4.50.
E. 5.00.
.25 = 1,800 ÷ (400 × $18)

Blooms: Apply
Difficulty: 1 Easy




A. 0.15.
B. 0.21.
C. 0.70.
D. 1.43.
E. 4.83.
0.21 = 1,800 ÷ [(500 × $1.20) + (360 × $2.50) + (400 × $18)]

Blooms: Apply

57. Creepers, Inc., manufactures stuffed spiders and mummies. During September the following
information was gathered:
Spiders Mummies
Actual $3.75 $5.75
What is the sales mix variance for Spiders?


1. Mix percentage: 6900 ÷ (6900 + 3100) = 69%; 7500 ÷ (7500 + 2500) = 75%
2. (.69 - .75) × 10,000 × $2.75 = $1,650 unfavorable

Blooms: Apply
variances.
Topic: Variance

Spiders Mummies
Actual $3.75 $5.75
What is the sales quantity variance for Spiders?

A. $0
6,900 + 3,100 = 10,000

7,500 + 2,500 = 10,000
10,000 - 10,000 = 0

Blooms: Apply
Difficulty: 1 Easy
variances.
Topic: Variance

Spiders Mummies
Actual $3.75 $5.75
What is the sales volume variance for Spiders?

A. $0.
= (6,900 - 7,500) × $2.75 = $1,650 unfavorable

Blooms: Apply
Difficulty: 1 Easy
variances.
Topic: Variance

60. Nappon Co. has two products named X and Y. The firm had the following master budget for the year
just completed:

Sales $260,000 360,000 $620,000
Variable Costs 156,000 180,000 336,000
Fixed Costs 130,000 108,000 238,000

Sales $202,500 $467,500 $670,000
Variable Costs 117,000 212,500 329,500
Fixed Costs 140,000 108,000 248,000


Budgeted units: $260,000 ÷ $130 = 2,000

Actual units: 1,500 (given)
Budgeted unit CM = $104,000 ÷ 2,000 = $52
(1,500 - 2,000) × $52 = $26,000, unfavorable

Blooms: Apply
variances.
Topic: Variance

just completed:

Sales $260,000 360,000 $620,000
Variable Costs 156,000 180,000 336,000
Fixed Costs 130,000 108,000 238,000

Sales $202,500 $467,500 $670,000
Variable Costs 117,000 212,500 329,500
Fixed Costs 140,000 108,000 248,000
The selling price variance for Product × is:


Actual price: $202,500 ÷ 1,500 = $135

($135 - $130) × 1,500 = $7,500 favorable

Blooms: Apply
Difficulty: 1 Easy
variances.
Topic: Variance

just completed:

Sales $260,000 360,000 $620,000
Variable Costs 156,000 180,000 336,000
Fixed Costs 130,000 108,000 238,000

Sales $202,500 $467,500 $670,000
Variable Costs 117,000 212,500 329,500
Fixed Costs 140,000 108,000 248,000


Total units: budget = 2,000 + 6,000 = 8,000; actual units = 1,500 + 8,500 = 10,000
Budgeted sales mix = 2,000 ÷ 8,000 = .25
Budgeted unit CM = $104,000 ÷ 2,000 = $52
(10,000 - 8,000) × .25 × $52 = $26,000 favorable

Blooms: Apply
variances.
Topic: Variance

just completed:

Sales $260,000 360,000 $620,000
Variable Costs 156,000 180,000 336,000
Fixed Costs 130,000 108,000 238,000

Sales $202,500 $467,500 $670,000
Variable Costs 117,000 212,500 329,500
Fixed Costs 140,000 108,000 248,000


Budgeted units: $360,000 ÷ $60 = 6,000

Actual Units = 8,500
Unit budgeted CM = $180,000 ÷ 6,000 = $30
(8,500 - 6,000) × $30 = $75,000 favorable

Blooms: Apply
variances.
Topic: Variance

just completed:

Sales $260,000 360,000 $620,000
Variable Costs 156,000 180,000 336,000
Fixed Costs 130,000 108,000 238,000

Sales $202,500 $467,500 $670,000
Variable Costs 117,000 212,500 329,500
Fixed Costs 140,000 108,000 248,000


1. Actual price: $467,500 ÷ 8,500 = $55

2. ($55 - $60) × 8,500 = $42,500 unfavorable

Blooms: Apply
Difficulty: 1 Easy
variances.
Topic: Variance

just completed:

Sales $260,000 360,000 $620,000
Variable Costs 156,000 180,000 336,000
Fixed Costs 130,000 108,000 238,000

Sales $202,500 $467,500 $670,000
Variable Costs 117,000 212,500 329,500
Fixed Costs 140,000 108,000 248,000


Budgeted unit CM = $180,000 ÷ 6,000 = $30
(10,000 - 8000) × .75 × $30 = $45,000 favorable

Blooms: Apply
variances.
Topic: Variance


Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000


Budgeted units: $286,000 ÷ $110 = 2,600

Actual units: = 3,000 (given)
Budgeted unit CM = $96,200 ÷ 2,600 = $37
(3,000 - 2,600) × $37 = $14,800 favorable

Blooms: Apply
variances.
Topic: Variance


Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000
The selling price variance for Product X is:

A. $0.
Actual price: $360,000 ÷ 3,000 = $120

($120 - $110) × 3,000 = $30,000 favorable

Blooms: Apply
Difficulty: 1 Easy
variances.
Topic: Variance


Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000
The sales mix variance for Product X is:


Total units: budget = 13,000; actual units = 12,000

Sales mix, budgeted: 2,600 ÷ 13,000 = 20%; actual: 3,000 ÷ 12,000 = 25%
(.25 - .20) × 12,000 × $37 = $22,200 favorable

Blooms: Apply
Difficulty: 3 Hard
variances.
Topic: Variance


Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000



(12,000 - 13,000) × .20 × $37 = $7,400 unfavorable

Blooms: Apply
Difficulty: 3 Hard
variances.
Topic: Variance


Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000


Budgeted units: $520,000 ÷ $50 = 10,400

Actual units = 9,000 (given)
Unit Budgeted CM = $301,600 ÷ 10,400 = $29
(9,000 - 10,400) × $29 = $40,600 unfavorable

Blooms: Apply
variances.
Topic: Variance


Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000


Actual price: $540,000 ÷ 9,000 = $60

($60 - $50) × 9,000 = $90,000 favorable

Blooms: Apply
Difficulty: 1 Easy
variances.
Topic: Variance


Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000
The sales mix variance for Product Y is:



Sales mix, budgeted: 10,400 ÷ 13,000 = 80%; actual: 9,000 ÷ 12,000 = 75%
(.75 - .80) × 12,000 × $29 = $17,400 unfavorable

Blooms: Apply
Difficulty: 3 Hard
variances.
Topic: Variance


Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000



Budgeted sales mix = 10,400 ÷ 13,000 = 80%
(12,000 - 13,000) × .80 × $29 = $23,200 unfavorable

Blooms: Apply
variances.
Topic: Variance


Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000

Fixed Costs 50,000 108,000 158,000

A. $19.95.
B. $35.50.
C. $30.60.
D. $40.00.
E. $77.50.
Total budgeted contribution = $397,800

$397,800 ÷ (13,000) = $30.60

Blooms: Apply
Difficulty: 1 Easy
variances.
Topic: Contribution Margin-Weighted CM-Operating Income


Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000
The firm's total sales quantity variance for the period is:


$7,400 + $23,200 = $30,600 unfavorable

Alternatively, (12,000 - 13,000) × $30.60 = $30,600

Blooms: Apply
Difficulty: 3 Hard
variances.
Topic: Variance


Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000
The firm's market share variance for the period is:


Market share: budget = 13,00 ÷ 130,000 = 10%; actual: 12,000 ÷ 100,000 = 12%
(.12 - .10) × 100,000 × $30.60 = $61,200 favorable

Blooms: Apply
Difficulty: 3 Hard
variances.
Topic: Variance


Sales $286,000 520,000 $806,000
Variable Costs 189,800 218,400 408,200
Fixed Costs 50,000 108,000 158,000

Sales $360,000 $540,000 $900,000
Variable Costs 195,000 216,000 411,000
Fixed Costs 50,000 108,000 158,000
The firm's market size variance for the period is:


Budgeted market share = 13,000 ÷ 130,000 = 10%

(100,000 - 130,000) × .10 × $30.60 = $91,800 unfavorable

Blooms: Apply
variances.
Topic: Variance

Actual Budget
Sales $235,000 $300,000
The effect of the sales volume variance on November's contribution margin is:


Price = $300,000 ÷ 6,000 = $50; Variable cost per unit = $180,000 ÷ 6,000 = $30
($50 - $30) × (5,000 - 6,000) = $20,000 unfavorable

Blooms: Apply
Difficulty: 1 Easy
variances.
Topic: Variance

Actual Budget
Sales $235,000 $300,000
The selling price variance for November is:


Price = $300,000 ÷ 6,000 = $50; $235,000 ÷ 5,000 = $47

($47 - $50) × 5,000 = $15,000 unfavorable

Blooms: Apply
Difficulty: 1 Easy
variances.
Topic: Variance

Actual Budget
Sales $235,000 $300,000
What additional information would be needed for Folsom to calculate the dollar impact of changes in
market share on November's operating income?

A. Folsom's budgeted market share and the budgeted total market size.
B. Folsom's budgeted market share, the budgeted total market size, and average market selling price.
C. Folsom's budgeted market share and the actual total market size.
D. Folsom's actual market share and the actual total market size.
E. There is no information that would make such a calculation possible.

Blooms: Analyze
variances.
Topic: Variance


Units 2,000 2,800 6,000 5,600
Sales $ $6,000 $7,560 $12,000 $11,760
Variable costs 2,400 2,800 6,000 5,880
Fixed Costs 1,800 1,900 2,400 2,400
Total Costs $4,200 $4,700 $8,400 $8,280
The net effect of AR-10's sales volume variance on profit is:

A. $720 favorable.

B. $817 favorable.
Price = 6,000 ÷ 2,000 = $3; unit variable cost = $2,400 ÷ 2,000 = $1.2
($3 - $1.2) × (2,800 - 2,000) = $1,440 favorable

Blooms: Apply
Difficulty: 1 Easy
variances.
Topic: Variance


Units 2,000 2,800 6,000 5,600
Sales $ $6,000 $7,560 $12,000 $11,760
Variable costs 2,400 2,800 6,000 5,880
Fixed Costs 1,800 1,900 2,400 2,400
Total Costs $4,200 $4,700 $8,400 $8,280
The net effect of ZR-7's selling price variance on profit is:

A. $240 favorable.

D. $560 favorable.
E. $800 unfavorable.
Price = $12,000 ÷ 6,000 = $2; Actual price = $11,760 ÷ 5,600 = $2.1 = ($2.10 - $2) × 5,600 = $560
favorable

Blooms: Apply
Difficulty: 1 Easy
variances.
Topic: Variance


Units 2,000 2,800 6,000 5,600
Sales $ $6,000 $7,560 $12,000 $11,760
Variable costs 2,400 2,800 6,000 5,880
Fixed Costs 1,800 1,900 2,400 2,400
Total Costs $4,200 $4,700 $8,400 $8,280
If products AR-10 and ZR-7 are substitutes for each other, a sales mix and sales volume variation for
the combined products can be calculated. If this combination is calculated, the net effect on profit of the
change in the unit sales mix is: (Round intermediate calculations to five significant digits, and your final
answer to the nearest whole dollar amount.)

A. $480 favorable.

B. $700 favorable.
C. $560 favorable.
D. $940 favorable.
For AR-10
Sales mix: budget: 2,000 ÷ 8,000 = 25%; actual: 2,800 ÷ 8,400 = 33.3333%
(.33333 - .25) × 8400 × $1.80 = $1,260 favorable
For ZR-7:
Sales mix: budget: 6,000 ÷ 8,000 = 75%; actual: 5,600 ÷ 8,400 = 66.6667%
(.66667 - .75) × 8400 × $1.00 = $700 unfavorable
Total mix variance: $1,260 - $700 = $560 favorable

Blooms: Apply
Difficulty: 3 Hard
variances.
Learning Objective: 16-04 Use the flexible budget to analyze sales performance over time.
Topic: Variance


Units 2,000 2,800 6,000 5,600
Sales $ $6,000 $7,560 $12,000 $11,760
Variable costs 2,400 2,800 6,000 5,880
Fixed Costs 1,800 1,900 2,400 2,400
Total Costs $4,200 $4,700 $8,400 $8,280
The sales quantity variance that would complement the variance calculated in the previous question is:

A. $480 favorable.

B. $507 favorable.
C. $560 favorable.
D. $960 favorable.
For AR-10
Sales mix: budget: 2,000 ÷ 8,000 = 25%
(8,400 - 8,000) × .25 × $1.80 = $180 favorable
For ZR-7:
Sales mix: budget: 6,000 ÷ 8,000 = 75%
(8,400 - 8,000) × .75 × $1.00 = $300 favorable
Total quantity variance: $180 + $300 = $480 favorable

Blooms: Apply
Difficulty: 3 Hard
variances.
Topic: Variance

85. TV Timers, Inc., manufactures time control devices for TV's. The firm has the following operating data
for its operations in July:

What is the company's market share variance?


(.34 - .32) × 10,000 × $6 = $1,200 favorable

Blooms: Apply
Difficulty: 1 Easy
variances.
Topic: Variance

86. TV Timers, Inc., manufactures time control devices for TV's. The firm has the following operating data
for its operations in July:

What is the company's market size variance?


(10,000 - 11,250) × .32 × $6 = $2,400 unfavorable

Blooms: Apply
Difficulty: 1 Easy
variances.
Topic: Variance

87. Jackson, Inc., manufactures two products that it sells to the same market. Excerpted below are its
budgeted and actual operating results for the year just completed:

Product X 22,500 42,000
Product Y 90,000 80,000
Product X $4.80 $3.90
Product Y $13.00 $14.00
Unit selling price
Product X $13.00 $14.00
Product Y $30.00 $29.00
Industry volume was estimated to be 1,875,000 units at the time the budget was prepared. Actual
industry volume for the period was 2,440,000 units. Jackson measures variances using contribution
margin.

A. $8.90.
B. $8.95.
C. $10.18.
D. $11.36.
E. $11.94.
[(22,500 × $4,80) + (90,000 × $13)] ÷ (22,500 + 90,000) = $11.36

Blooms: Apply
Difficulty: 1 Easy
variances.


Product X 22,500 42,000
Product Y 90,000 80,000
Product X $4.80 $3.90
Product Y $13.00 $14.00
Unit selling price
Product X $13.00 $14.00
Product Y $30.00 $29.00
margin.
The market share variance is:


(.05 - .06) × 2,440,000 × $11.36 = $277,184 unfavorable

Blooms: Apply
variances.
Topic: Variance


Product X 22,500 42,000
Product Y 90,000 80,000
Product X $4.80 $3.90
Product Y $13.00 $14.00
Unit selling price
Product X $13.00 $14.00
Product Y $30.00 $29.00
margin.
The market size variance is:


(2,440,000 - 1,875,000) × .06 × $11.36 = $385,104 favorable

Blooms: Apply
variances.
Topic: Variance


Product X 22,500 42,000
Product Y 90,000 80,000
Product X $4.80 $3.90
Product Y $13.00 $14.00
Unit selling price
Product X $13.00 $14.00
Product Y $30.00 $29.00
margin.
Total sales quantity variance is:


Market share variance + Market Size Variance = Total Quantity variance - $277,184 + $385,104 =
$107,920 favorable

Blooms: Apply
variances.
Topic: Variance


Product X 22,500 42,000
Product Y 90,000 80,000
Product X $4.80 $3.90
Product Y $13.00 $14.00
Unit selling price
Product X $13.00 $14.00
Product Y $30.00 $29.00
margin.
If fixed costs are budgeted for $500,000 and are actually $500,000, what is the difference between
budgeted and actual operating income?


Budgeted total contribution: (22,500 × $4.8) + (90,000 × $13) = $1,278,000

Actual total contribution: (42,000 × $3.90) + (80,000 × $14) = $1,283,800
Since fixed costs do not change, the difference in operating income is
$1,283,800 - $1,278,000 = $5,800 favorable

Blooms: Apply
variances.


Product X 22,500 42,000
Product Y 90,000 80,000
Product X $4.80 $3.90
Product Y $13.00 $14.00
Unit selling price
Product X $13.00 $14.00
Product Y $30.00 $29.00
margin.
The total contribution margin sales volume variance of the period is:


[(42,000 - 22,500) × $4.8] + [(80,000 - 90,000) × $13] = $36,400 unfavorable

Blooms: Apply
variances.
Topic: Variance


Product X 22,500 42,000
Product Y 90,000 80,000
Product X $4.80 $3.90
Product Y $13.00 $14.00
Unit selling price
Product X $13.00 $14.00
Product Y $30.00 $29.00
margin.
The total selling price variance of the period is:

A. $0.
[($14 - $13) × 42,000] + [($29 - $30) × 80,000] = $38,000 unfavorable

Blooms: Apply
Difficulty: 1 Easy
variances.
Topic: Variance

Actual Budget
Sales Units
Product X 20,000 90,000
Product Y 140,000 110,000
Total 160,000 200,000
Contribution Margin
Product X $9.00 $8.00
Product Y $6.00 $5.00
The total sales mix variance for both products is:


For Product X
Sales mix: budget: 90 ÷ 200 = 45%; actual: 20 ÷ 160 = 12.5%
(.125 - .45) × 160,000 × $8 = $416,000 unfavorable
For Product Y:
Sales mix: budget: 110 ÷ 200 = 55%; actual: 140 ÷ 160 = 87.5%
(.875 - .55) × 160,000 × $5 = $260,000 favorable
Total mix variance: $260,000 - $416,000 = $156,000 unfavorable

Blooms: Apply
Difficulty: 3 Hard
variances.
Topic: Variance

Actual Budget
Sales Units
Product X 20,000 90,000
Product Y 140,000 110,000
Total 160,000 200,000
Contribution Margin
Product X $9.00 $8.00
Product Y $6.00 $5.00
The total sales quantity variance for both products is:


For Product X.
Budgeted sales mix = 90 ÷ 200 = .45
(160,000 - 200,000) × .45 × $8 = $144,000 unfavorable
For Product Y.
Budgeted sales mix = 110 ÷ 200 = .55
(160,000 - 200,000) × .55 × $5 = $110,000 unfavorable
Total variance: $144,000 + $110,000 = $254,000 unfavorable

Blooms: Apply
variances.
Topic: Variance

Actual Budget
Sales Units
Product X 20,000 90,000
Product Y 140,000 110,000
Total 160,000 200,000
Contribution Margin
Product X $9.00 $8.00
Product Y $6.00 $5.00

A. $5.15.
B. $6.35.
C. $6.70.
D. $6.80.
E. $7.00.
[($8 × 90,000) + ($5 × 110,000)] ÷ (90,000 + 110,000) = $6.35

Blooms: Apply
Difficulty: 1 Easy
variances.

Actual Budget
Sales Units
Product X 20,000 90,000
Product Y 140,000 110,000
Total 160,000 200,000
Contribution Margin
Product X $9.00 $8.00
Product Y $6.00 $5.00
The contribution margin sales volume variance is:


[(20,000 - 90,000) × $8] + [(140,000 - 110,000) × $5] = $410,000 unfavorable

Blooms: Apply
variances.
Topic: Variance

98. Gourmet Aroma Coffee House has an exclusive contract with Columbia exporters. Two brands of
gourmet coffee are imported, Morning Thunder (MT) and Evening Tender (ET). The following data are
provided for the current fiscal year:

MT ET MT ET
Sales (in pounds) 4,000 4,000 3,960 5,040
The total market was estimated to be 80,000 pounds at the time of budget. The actual total market for
the year is 75,000 pounds.
What is ET's contribution margin sales volume variance?


Budgeted CM = $60 - 36 = $24

(5,040 - 4,000) × $24 = $24,960 favorable

Blooms: Apply
Difficulty: 1 Easy
variances.
Topic: Variance


MT ET MT ET
Sales (in pounds) 4,000 4,000 3,960 5,040
What is MT's contribution margin sales volume variance?


Budgeted CM = $40 - 20 = $20

(3,960 - 4,000) × $20 = $800 unfavorable

Blooms: Apply
Difficulty: 1 Easy
variances.
Topic: Variance


MT ET MT ET
Sales (in pounds) 4,000 4,000 3,960 5,040


$24,960 - $800 = $24,160 favorable

Blooms: Apply
variances.
Topic: Variance


MT ET MT ET
Sales (in pounds) 4,000 4,000 3,960 5,040
What is MT's sales mix variance?


Sales mix: budget: 4 ÷ 8 = 50%; actual: 3,960 ÷ 9,000 = 44%
(.44 - .5) × 9,000 × $20 = $10,800 unfavorable

Blooms: Apply
Difficulty: 3 Hard
variances.
Topic: Variance


MT ET MT ET
Sales (in pounds) 4,000 4,000 3,960 5,040
What is ET's sales mix variance?


Sales mix: budget: 4,000 ÷ 8,000 = 50%; actual: 5,040 ÷ 9,000 = 56%
(.56 - .5) × 9,000 × $24 = $12,960 favorable

Blooms: Apply
Difficulty: 3 Hard
variances.
Topic: Variance


MT ET MT ET
Sales (in pounds) 4,000 4,000 3,960 5,040


$10,800 F - $12,960 U = $2,160 favorable

Blooms: Apply
Difficulty: 3 Hard
variances.
Topic: Variance


MT ET MT ET
Sales (in pounds) 4,000 4,000 3,960 5,040
What is MT's sales quantity variance?


(9,000 - 8,000) × .5 × $20 = $10,000 favorable

Blooms: Apply
variances.
Topic: Variance


MT ET MT ET
Sales (in pounds) 4,000 4,000 3,960 5,040
What is ET's sales quantity variance?


(9,000 - 8,000) × .5 × $24 = $12,000 favorable

Blooms: Apply
variances.
Topic: Variance


MT ET MT ET
Sales (in pounds) 4,000 4,000 3,960 5,040


$10,000 + $12,000 = $22,000 favorable

Blooms: Apply
variances.
Topic: Variance


MT ET MT ET
Sales (in pounds) 4,000 4,000 3,960 5,040


Market share: budget: 8,000 ÷ 80,000 = .10; actual market share = 9,000 ÷ 75,000 = .12
Budgeted weighted average CM = [($24 × 4,000 + $20 × 4,000)] ÷ (4,000 + 4,000) = $22
(.12 - .10) × 75,000 × $22 = $33,000 favorable

Blooms: Apply
Difficulty: 3 Hard
variances.
Topic: Variance


MT ET MT ET
Sales (in pounds) 4,000 4,000 3,960 5,040


(75,000 - 80,000) × .10 × $22 = $11,000 unfavorable

Blooms: Apply
variances.
Topic: Variance

109. Twitter Company manufactures a remote control device for home theaters. The following data were
from the operating period just completed:



(.15 - .12) × 12,000 × ($60 - 30) = $10,800 favorable

Blooms: Apply
Difficulty: 1 Easy
variances.
Topic: Variance

110. Twitter Company manufactures a remote control device for home theaters. The following data were
from the operating period just completed:



(12,000 - 11,000) × .12 × ($60 - $30) = $3,600 favorable

Blooms: Apply
Difficulty: 1 Easy
variances.
Topic: Variance

111. Wheat Inc. has an exclusive contract with an exporter. Two brands of wheat are imported, labeled AB
and CD. The following data are provided for the current fiscal year:

AB CD AB CD
Sales (in bushels) 1,500 2,500 1,200 3,600
What is AB's contribution margin sales volume variance?

A. $0.
1. Budgeted CM = $20 - 15 = $5
2. (1,200 - 1,500) × $5 = $1,500 unfavorable

Blooms: Apply
Difficulty: 1 Easy
variances.
Topic: Variance


AB CD AB CD
Sales (in bushels) 1,500 2,500 1,200 3,600
What is CD's contribution margin sales volume variance?

A. $500 favorable.

1. Budgeted CM = $10 - 5 = $5
2. (3,600 - 2,500) × $5 = $5,500 favorable

Blooms: Apply
Difficulty: 1 Easy
variances.
Topic: Variance


AB CD AB CD
Sales (in bushels) 1,500 2,500 1,200 3,600

A. $0.
$1,500 unfavorable + $5,500 favorable = $4,000 favorable

Blooms: Apply
variances.
Topic: Variance


AB CD AB CD
Sales (in bushels) 1,500 2,500 1,200 3,600

A. $0.
B. $500 favorable.
D. $3.000 favorable.
1. For Product AB
2. Total units: budget = 1,500 + 2,500 = 4,000; actual units = 1,200 + 3,600 = 4,800
3. Sales mix: budget: 1,500 ÷ 4,000 = 37.5%; actual: 1200 ÷ 4800 = 25%
4. (.25 - .375) × 4,800 × $5 = $3,000 unfavorable
5. For Product CD:
6. Sales mix: budget: 2,500 ÷ 4,000 = 62.5%; actual: 3,600 ÷ 4,800 = 75%
7. (.75 - .625) × 4,800 × $5 = $3,000 favorable
8. Total mix variance: $3,000 - $3,000 = 0

Blooms: Apply
Difficulty: 3 Hard
variances.
Topic: Variance


AB CD AB CD
Sales (in bushels) 1,500 2,500 1,200 3,600

A. $0.
1. For Product AB:

3. Budgeted sales mix = 1,500 ÷ 4,000 = .375
4. (4,800 - 4,000) × .375 × $5 = $1,500 favorable
5. For Product CD:
7. Budgeted sales mix = 2,500 ÷ 4,000 = .625
8. (4,800 - 4,000) × .625 × $5 = $2,500 favorable
9. Total variance: $1,500 + $2,500 = $4,000 favorable

Blooms: Apply
Difficulty: 1 Easy
variances.
Topic: Variance


AB CD AB CD
Sales (in bushels) 1,500 2,500 1,200 3,600

A. $0.
B. $560 favorable.
1. Market share: budget: 8,000 ÷ 40,000 = .20; actual market share = 4,800 ÷ 32,000 = .15
2. Budgeted weighted average CM = [($5 × 1,500) + ($5 × 2,500)] ÷ (1,500 + 2,500) = $5
3. (.2 - .15) × 4,800 × $5 = $1,200 favorable

Blooms: Apply
Difficulty: 3 Hard
variances.
Topic: Variance


AB CD AB CD
Sales (in bushels) 1,500 2,500 1,200 3,600


E. $0.
(1,500 + 2,500) ÷ 40,000 = 10%; (32,000 - 40,000) × .10 × $5 = $4,000 unfavorable

Blooms: Apply
variances.
Topic: Variance

118. Which of the following is not a key determinant of productivity for most organizations?

A. Control of waste.

B. Product and manufacturing process innovation.
C. Control of overhead costs.
D. Fluctuations in demand.

Blooms: Remember

119. Which of the following is a total productivity measure?

A. Units of output per dollar value of input.

B. Units of output per units of materials.
C. Units of output per labor hour.
D. Units of output per machine hour.

Blooms: Remember
Difficulty: 1 Easy

120. A firm manufactures 5,000 umbrellas per year. The umbrellas cost $25,000 to manufacture. The firm
has an annual overhead cost of $5,000. What is the total productivity of manufacturing umbrellas?

A. 0.20 umbrellas/dollar

B. 0.20 dollars/umbrella
C. 5 umbrellas/dollar
D. 0.17 dollars/umbrella
5,000 ÷ $25,000 = .20 umbrellas per dollar

Blooms: Apply
Difficulty: 1 Easy

121. Which of the following is not an element of a product's sales quantity variance?

A. Budgeted sales mix ratio for the product.

B. Budgeted contribution margin per unit of the product.
C. Difference in total units of all products between the actual units sold and the units budgeted to be
sold.
D. Actual sales mix ratio.

Blooms: Remember
Difficulty: 1 Easy
variances.
Topic: Variance

122. Which of the following is not a part of the sales mix variance equation?

A. Actual sales mix of the product.

B. Budgeted sales mix of the product.
C. Actual contribution margin per unit of the product.
D. Total units sold.

Blooms: Remember
variances.
Topic: Variance

123. The market share variance measures the effect of the difference in market shares on the firm's total
contribution margin and:

A. Net income.

B. Operating income.
C. Investment income.
D. Total sales.

Blooms: Understand
Difficulty: 1 Easy
variances.
Topic: Variance

Essay Questions

124. Julie Hilger started New Treads to combine fashion and sustainability. The original production of
sandals made from recycled plastic has expanded to a complete line of casual footwear. Current sales
total over $2 million. Julie hired the firm's first controller early this year, and has asked him to detail
suggestions for ways to increase profits. Adrian Warring, the new controller, has compiled a list of
recommended changes that focus on quality improvements. New Treads customers expect high quality
at a low price, a "value" product. So the company must simultaneously watch costs and quality. After
receiving his list of suggestions, Julie calls Adrian to her office and says, "I don't see how improving
quality can increase productivity. In fact, it seems to me that efforts to improve quality will slow down
production and decrease productivity."
Required:
Using specific examples, help Adrian explain to Julie why efforts to improve quality can also boost
productivity. How does productivity play a role in the firm's strategy and competitive environment?

Quality improvements often decrease waste and spoiled units, thus decreasing the amount of input
resources needed. More careful selection of quality raw materials (plastic, buckles, and sole materials)
will reduce spoiled units caused by poor quality materials. Better training for cutters and assemblers will
reduce the number of units spoiled by bad workmanship. Care in adjusting and maintaining equipment
should help reduce waste that is machine-caused.
Process re-engineering can help re-define essential tasks and eliminate non-essential tasks. Reducing
the number of times employees must handle material in the production process improves productivity
and eliminates useless effort. Implementing a continuous improvement program should help develop a
sensitivity among the employees to ways of changing their actions to improve both their process and
products.
A focus on both quality and cost is a common feature of cost leadership firms. Julie's firm and its
products appeal to a "value" driven customer that appreciates very good quality at a low cost. The focus
on quality and productivity at the same time can help the firm achieve its strategy.

AACSB: Communication
Blooms: Analyze
Text Feature: Strategy

125. Dr. Howard Abelson is the director of the Wellness House, a residential center for recovering
alcoholics. A typical patient spends 3-4 weeks in an intensive program of rehabilitation. The Wellness
House has a staff of 45, including 12 certified therapists, to serve an average patient load of 15. Howard
Abelson is attempting to develop some productivity measures for the center, but is not aware of the
limitations of productivity measurement in not-for-profit organizations. You have been called in as a
consultant to help develop appropriate productivity measures.
Required:
(a) Identify any major differences/limitations you face in developing performance measures for the
Wellness House.
(b) Recommend two or three overall measures of productivity that are appropriate for the Wellness
House as a not-for-profit organization.

(a) Many of the outputs and required tasks of this organization cannot be measured precisely, for
example, how does one define patient recovery? Do all patients require the same treatment? The same
amount of each treatment? How does one account for cost differences in size variations of group
treatment? Is the amount or intensity of treatment affected by the insurance benefits available?
(b) Since health insurance providers probably pay for most of the patients' costs of care, some ratio of
financial productivity can be used. An example is the ratio of average days' stay per patient divided into
the "revenue" generated. This measure is effective if the relationship is fairly consistent. Some measures
of the cost of providing different classes of service can be calculated, for example, the cost of
psychotherapy on an individual basis versus the per patient cost of group therapy. Local, regional and
national data and measures for alcoholic rehabilitation centers should be available as another baseline
standard against which one could judge productivity. As the center gathers its own data over time, trend
analysis of cost changes would be useful for performance measurement.

AICPA: BB Industry
Blooms: Analyze
Text Feature: Service

126. Paquindo Co. has two products: X and Y. The firm had the following budget and operating results for
the period just ended. The budgeted total industry sales for both products was 324,800 units and the
actual industry sales was 350,000.
Master Budget
Sales $324,800 $426,300 $751,100
Variable costs 194,880 213,150 408,030
Contribution margin 129,920 213,150 $343,070
Fixed costs 162,000 130,000 292,000
Operating Results Product X Product Y Total
Sales $365,400 $457,500 $822,900
Variable costs 243,600 201,300 444,900
Fixed costs 163,000 130,000 293,000
Required:
(A) Calculate the contribution margin sales volume variance for Product X.
(B) Calculate the contribution margin sales volume variance for Product Y.
(C) Calculate the sales mix variance for Product X.
(D) Calculate the sales quantity variance for Product X.
(E) Calculate the sales mix variance for Product Y.
(F) Calculate the sales quantity variance for Product Y.
(G) Calculate the market share variance for both products.
(H) Calculate the market size variance for both products.

(A)
Product X:
Sales
Flexible Master Volume
Budget Budget Variance
Sales (@$160 & $160) $336,000 $324,800
Variable costs (@$96 & $96) 201,600 194,880
Contribution margin $134,400 $129,920 $4,480 F
Or (2,100 - 2,030) × $64 = $4,480F
(B)
Product Y:
Sales
Flexible Master
Volume
Budget Budget
Variance
Sales (@$70 & $70) $343,000 $426,300
Variable costs (@$35 & $35) 171,500 213,150
Contribution margin $171,500 $213,150 $41,650 U
Or: (4,900 - 6,090) × $35 = $41,650U
(C)
Sales mix variance for Product X:

Actual sales mix percentage 30%
Budgeted sales mix percentage 25%
Difference 5% F
Actual total units sold for both products 7,000
Budgeted unit contribution margin × $64.00
Sales mix variance $22,400 F
Or, [(2,100/7,000) - (2,030/8,120)] × 7,000 × $64 = $22,400 F
(D)
Sales quantity variance for Product X:

Budgeted total units sold for both products 8,120
Difference 1,120 U
Budgeted sales mix percentage × 25%
Sales quantity variance $17,920 U
(E)
Sales-mix variance for Product Y

Difference 5% U
Actual total units sold for both products × 7,000
Sales mix variance $12,250 U
(F)
Sales quantity variance for Product Y:

Difference 1,120 U
Budgeted unit contribution margin $35.00
Sales quantity variance $29,400 U
(G)
Budgeted industry sales % (8,120/324,800) 2.5%

Actual industry sales % (7,000/350,000) 2.0%
Difference .05% U
Total actual industry sales × 350,000
Budgeted average contribution margin ×$42.25
Market share variance $73,937.50 U
Where budgeted average CM = $343,070/8,120 = $42.25
(H)
Actual industry sales 350,000

Budgeted industry sales 324,800
Difference 25,200 F
Total budgeted market share × 2.5%
Budgeted average contribution margin × $42.25
Market size variance $26,617.50 F
Actual Budget
Sales Units
Product X 2,100 2,030
Product Y 4,900 6,090
Total 7,000 8,120
Product X 30% 25%
Product Y 70% 75%
Price
Product X $174.00 $160.00
Product Y $93.37 $70.00
Product X $116.00 $96.00
Product Y $41.08 $35.00
Contribution per unit
Product X $58.00 $64.00
Product Y $52.29 $35.00
Weighted Average CM
Industry Volume 350,000 324,800
Market Share 2.00% 2.5000%
Sales Price Flexible Sales Volume
Budget
Sales Actual Variance Budget Variance
Product X $365,400 $29,400 $336,000 $11,200 $324,800
Product Y 457,500 114,500 343,000 (83,300) 426,300
Total Sales $822,900 $143,900 $679,000 ($72,100) $751,100
Less Variable Costs
Product X $243,600 $42,000 $201,600 6,720 $194,880
Product Y 201,300 29,800 171,500 (41,650) 213,150
Total Variable Cost $444,900 $71,800 $373,100 (34,930) $408,030
Contribution
Product X $121,800 ($12,600) $134,400 $4,480 $129,920
Product Y 256,200 84,700 171,500 (41,650) 213,150
Total Contribution $378,000 $72,100 $305,900 ($37,170) $343,070
Less Fixed Costs 293,000 292,000
Operating Income $85,000 $51,070
Sales Mix Sales Quantity Volume

Variance Variance Variance
Product X $22,400.00 ($17,920.00) $4,480.00
Product Y (12,250.00) ($29,400.00) ($41,650.00)
$10,150.00 ($47,320.00) ($37,170.00)
Total
Market Share Market Size
Quantity
Variance Variance
Variance
Both Products ($73,937.50) $26,617.50 ($47,320.00)

Blooms: Apply
Difficulty: 3 Hard
variances.
Topic: Variance

127. Zeller Company had two products named Q and R. The firm had the following budget for the period just
ended:
Master Budget
Product Q Product R Total
Sales $100,000 $150,000 $250,000
Variable costs 75,000 127,500 202,500
Fixed costs 10,000 8,000 18,000
Operating Results
Actual Results Product Q Product R Total
Sales $110,000 $168,000 $278,000
Variable costs 82,500 112,000 194,500
Fixed costs 10,000 8,000 18,000
Required:
(A) Calculate the contribution margin sales volume variance for Product Q.
(B) Calculate the contribution margin sales volume variance for Product R.
(C) Calculate the sales mix variance for Product Q.
(D) Calculate the sales quantity variance for Product Q.
(E) Calculate the sales mix variance for Product R.
(F) Calculate the sales quantity variance for Product R.

(A)
Product Q:
Sales
Sales (@ $100 & $100) $110,000 $100,000
Variable costs (@ $75 & $75) 82,500 75,000
Contribution margin $27,500 $25,000 $2,500 Favorable
Or (1,100 - 1,000) × $25 = $2,500 F
(B)
Product R:
Sales
Sales (@ $100) $140,000 $150,000
Variable costs (@ $85) 119,000 127,500
Contribution margin $21,000 $22,500 $1,500 Unfavorable
Or, (1,400 - 1,500) × $15 = $1,500 U
(C)
Sales mix variance for Product Q:

Actual sales mix percentage (1,100/2,500 = 44%) 44%
Budgeted sales mix percentage (1,000/2,500 = 40%) 40%
Difference 4% Favorable
Sales mix variance $2,500 Favorable
Or, (1,100/2,500 - 1000/2,500) × 2,500 × $25 = $2,500 F
(D)
Sales quantity variance for Product Q:

Difference 0
Sales quantity variance $0
(E)
Sales-mix variance for Product R:

Difference 4% Unfavorable
Budgeted unit contribution margin ×$15.00
Sales mix variance $1,500 Unfavorable
Or, (1,400/2,500 - 1,500/2,500) × 2,500 × $15 = $1,500 U
(F)
Sales quantity variance for Product R:

Difference 0
Sales quantity variance $0
Actual Budget
Sales Units
Product Q 1,100 1,000
Product R 1,400 1,500
Total 2,500 2,500
Product Q 44.00% 40%
Product R 56.00% 60%
Price
Product Q $100.00 $100.00
Product R $120.00 $100.00
Product Q $75.00 $75.00
Product R $80.00 $85.00
Contribution per unit
Product Q $25.00 $25.00
Product R $40.00 $15.00
Weighted Average CM $19.000
Industry Volume
Market share

Budget
Sales Actual Variance Budget Variance
Product Q $110,000 $- $110,000 $10,000 $100,000
Product R 168,000 28,000 140,000 (10,000) 150,000
Total Sales $278,000 $28,000 $250,000 $0 250,000
Less Variable Costs
Product Q $82,500 $- $82,500 7,500 $75,000
Product R 112,000 (7,000) 119,000 (8,500) 127,500
Total Variable Costs $194,500 ($7,000) $201,500 (1,000) $202,500
Contribution
Product Q $27,500 $- $27,500 $2,500 $25,000
Product R 56,000 35,000 21,000 (1,500) 22,500
Total Contribution $83,500 $35,000 $48,500 $1,000 $47,500
Operating Income $65,500 $29,500
Sales Mix Variance Sales Quantity Variance Volume Variance

Product Q $2,500 $- $2,500
Product R (1,500) $- (1,500)
$1,000 $- $1,000

Blooms: Apply
Difficulty: 3 Hard
variances.
Topic: Variance

128. The following information is for the Wetherby Company.
2016 2015
1. Compute the partial operational productivity measures for 2015 and 2016.
2. Compute the partial financial productivity ratios for 2015 and 2016.
3. Separate the changes of the partial financial productivity ratios from 2015 to 2016 into productivity
change, input price change, and output change.

1. Materials: .41667 for 2016, .435484 for 2015

Labor: .3 for 2016, .3 for 2015
2. Materials: .01042 for 2016; .01146 for 2015
Labor: .006 for 2016, .00682 for 2015
3. Productivity change: Materials (.00047), Labor 0
In put price: Materials (.000573), Labor (.000818)
Output change: Materials and Labor, 0
2013 2012
Total Materials Cost $5,760,000 = 144,000 × $40 $4,712,000
Total Labor Cost $10,000,000 = 200,000 × $50 $7,920,000
Financial Partial Productivity
Materials 0.01042 = 60000/5,760,000 0.01146
Labor 0.00600 = 60000/10,000,000 0.00682
Operational Partial Productivity
Materials 0.41667 = 60,000/144,000 0.435484
Labor 0.30000 = 60,000/200,000 0.300000
Current Output at Prior Year

Productivity
Materials 137,777.78 = 60,000/.435484
Labor 200,000.00 = 60,000/.3
Decomposition of Partial Productivity (as done in Exhibit 16.5)
A B C D
Current Current Current Prior
Output output/ output/ output/ output/
Cur. ur. Output

Output at at Prior
Input Current Input Prior
Prior Prod. Pro
Amount Input X Productivit Price Output Input X Total
y
Current *Current Prior input

Prior
Input Cost input cost input cost cost
Change Change Change input cos Change
Output 60,000 60,000 60,000 54,000
Input Amount
Materials 144,000 137,778 137,778 124,000
Labor 200,000 200,000 200,000 180,000
Cost per unit

of input
Materials $40 $40 $38 $38
Labor $50 $50 $44 $44
Direct
0.010417 (0.000470) 0.010887 (0.000573) 0.011460 - 0.011460 (0.001043)
materials
Direct Labor 0.006000 - 0.006000 (0.000818) 0.006818 - 0.006818 (0.000818

Blooms: Analyze
Blooms: Apply
Difficulty: 3 Hard

129. The Tempest Company has the following information for the current year.
Actual Budget
Sales Units
Product X 22,000 20,000
Product Y 33,000 30,000
Total 55,000 50,000
Product X 40.0% 40.0%
Product Y 60.0% 60.0%
Price
Product X $22.00 $20.00
Product Y $35.00 $30.00
Product X $15.00 $14.00
Product Y $16.00 $18.00
The industry budget is 2 million units and the actual result for the industry is 2.5 million units.
Required:



0
0
$12,000 favorable
$36,000 favorable
$12,000 favorable
$36,000 favorable
72,000 unfavorable
120,000 favorable
Actual Budget
Sales Units
Product X 22,000 20,000
Product Y 33,000 30,000
Total 55,000 50,000
Product X 40.000% 40.00%
Product Y 60.000% 60.00%
Price
Product X $22.00 $20.00
Product Y $35.00 $30.00
Product X $15.00 $14.00
Product Y $16.00 $18.00
Contribution Margin
Product X $7.00 $6.00
Product Y $19.00 $12.00
Budgeted CM per unit $9.600 = 480,000/50,000
Industry Volume 2,500,000 2,000,000
Market Share 2.2000% 2.500%

Sales Actual Variance Budget Variance Budget
Product X $484,000 $44,000 $440,000 $40,000 $400,000
Product Y 1,155,000 165,000 990,000 90,000 900,000
Total Sales $1,639,000 $209,000 $1,430,000 $130,000 1,300,000
Less Variable Costs
Product X $330,000 22,000.00 $308,000 28,000 $280,000
Product Y 528,000 (66,000.00) 594,000 54,000 540,000
Total Variable Costs

$858,000 (44,000.00) $902,000 82,000 $820,000
Contribution
Product X $154,000 $22,000 $132,000 $12,000 $120,000
Product Y 627,000 231,000 396,000 36,000 360,000
Total Contribution
$781,000 $253,000 $528,000 $48,000 $480,000
Operating Income $281,000 ($20,000)
Sales Mix Sales Quantity Volume

Product X - 12,000 12,000
Product Y - 36,000 36,000
- 48,000 48,000
Product X Sales mix variance = (.4 - .4) × 55,000 × $7: sales quantity = (55,000 - 50,000) × .4 × $6.00
Market Share Market Size Total Quantity

Both Products ($72,000) $120,000 $48,000
Market share variance = (.022 - .025) × 2,500,000 × $9.6; market size = (2,500,000 - 2,000,000)

× .025 × $9.60

Blooms: Apply
variances.
Topic: Variance

130. Taylor, Inc., has the following information for the two most recent years of operations.
2016 2015
Sales Units 33,000 40,000
Price $30.00 $33.00
Materials cost per pound $15.00 $18.00
Pounds of material required per unit 0.75 1.00
Labor hours required per unit 1.80 2.00
Wage rate per hour $9.00 $10.00
Contribution margin $2.55 ($5.00)
Required:
1. Selling price variance in sales dollars.

2. Sales volume variance in contribution.
3. Materials usage variance.
4. Materials price variance.
5. Labor usage variance.
6. Labor rate variance.

Sales price variance in sales dollars ($99,000) unfavorable

Sales volume variance in contribution $35,000 favorable
Materials usage variance $74,250 unfavorable
Materials price variance ($148,500) favorable
Labor usage variance $59,400 unfavorable
Labor rate variance ($66,000) favorable

2016 Variance Budget Variance 2015
Sales $990,000 ($99,000) $1,089,000 ($231,000) $1,320,000
Less Variable Costs
Materials $371,250 ($222,750) $594,000 (126,000) $720,000
Labor 534,600 ($125,400) 660,000 (140,000) 800,000
Contribution $84,150 $249,150 ($165,000) $35,000 ($200,000)
Sales price variance in sales
($99,000) unfavorable
dollars
Sales volume variance in
$35,000 favorable
contribution
2. Materials and labor usage and price variances
Actual input at prior Flexible

2016 year rate budget
Materials $371,250 $74,250 $445,500 ($148,500) $594,000
Labor $534,600 $59,400 $594,000 ($66,000) $660,000
Total $905,850 $133,650 $1,039,500 ($214,500) $1,254,000
Materials usage variance $74,250 unfavorable
Materials price variance ($148,500) favorable
Labor usage variance $59,400 unfavorable
Labor rate variance ($66,000) favorable

Blooms: Apply
Difficulty: 3 Hard
variances.
Topic: Variance

131. In early 2006, the new CEO of Hewlett-Packard (H-P), Mark Hurd, became aware of a number of
customer complaints about the accessibility of sales support at the company. The complaints referred to
a confusing management structure and lack of contact with sales support personnel from H-P. There
were 17,000 people working in H-P sales, and customers, particularly the large corporate customers,
were frustrated dealing with the complexity of the H-P sales system.
Required:
What would you propose to Mark Hurd, the CEO at H-P, regarding an overhaul of the sales support
systems at H-P?

Points for CEO Hurd to consider:
ο is H-P measuring the key drivers of sales performance?

ο customer satisfaction
ο customer profitability
ο the effects of product price changes, mix changes, and quantity changes; this is particularly important
for H-P due to its relatively recent merger with Compaq computer and the resulting increased
complexity of product offerings and sales staff relationships
ο an analysis of market share and market size by key product line; H-P competes in business where
there is strong competition from Dell, Canon, and other manufactures of computer peripherals.
ο streamline the sales force by removing layers, and allowing quicker response to customer questions
and requests
ο tie sales commissions to the profitability of the products sold rather than total sales value, to provide a
direct incentive for sales people to identify and to sell the most profitable products
ο increase the time sales people were with customers, while reducing and streamlining the
administrative process of in-office meetings and reports
ο have the sales people responsible to business units (product lines), rather than having the sales people
selling the broad range of H-P products

AICPA: FN Decision Making
Blooms: Analyze
Difficulty: 1 Easy
variances.

132. Triple Delight is a food stand located on a busy corner in the local business district. On average it sells
three cheeseburgers and one fishwich for every four hamburgers sold. The following data were culled
from its operation for 2016:
Total operating income variance

Hamburger $18,000 Unfavorable
Fishwich 10,000 Unfavorable
Sales quantity variance
Hamburger 14,000 Favorable
Sales mix variance
Hamburger 2,240 Unfavorable
Cheeseburger 4,800 Unfavorable
Fixed costs variances 0
Market share variance $96,000 Unfavorable
Market share variance 126,000 Favorable
Change in market share 4%
Fixed cost flexible budget variance 0
The estimated total volume for the food stands in the region was 2,500,000 units. Consistent good
weather pushed the total volume for the year to 4,000,000.
Required:
1. Budgeted weighted-average contribution margin.

2. Budgeted and actual market shares.
3. Budget and actual total units sold.
4. Sales quantity variances for fishwich.
5. Budgeted contribution margin of each product.
6. Actual sales mix of each product.
7. Budget and actual units sold for each product.

1. Budget weighted average contribution margin (BWACM)

Market Share Variance = Difference in market shares x
Total actual market size × BWACM
$96,000 U = 4% × 4,000,000 × BWACM
BWACM = $0.60
2. Budget and actual market shares

Market Size Variance = Difference in market sizes x
Budget market share × BWACM
$126,000 F = ($4,000,000 - $2,500,000) × Budget Market Share × $0.6
Budget Market Share = 14%
An unfavorable market share variance is a result of having a smaller actual market

share than the budgeted market share.
Actual Market Share = 14% - 4% = 10%
3. Budget and actual total units of sales

Budget total units of sales = Budgeted total market size × budgeted market share
= 2,500,000 × 14%
= 350,000
Total units sold = Actual total market size × Actual market share
= 4,000,000 ×10%
= 400,000
4. Fishwich sales quantity variance

Total sales quantity variances (all products)
= Market share variance + Market size variance
= $96,000 U + $126,000 F
= $30,000 F
Fishwich sales quantity variance
= Total sales quantity variance - (Hamburger sales quantity variance Cheeseburger sales quantity variance)
= $30,000 F - ($14,000 F + $15,000 F)
= $1,000 F
5. Budget contribution margin of each of the products

Budget sales mixes: Hamburger 4/8 or 0.5
Cheeseburger 3/8 or 0.375
Fishwich 1/8 or 0.125
Sales quantity variance of a product
= Difference in total sales quantities for all products × Budgeted sales mix of the product × Budgeted

contribution margin of the product
Sales quantity variance of a product
= Difference in total sales quantities for all products × Budgeted sales mix of the product × Budgeted

contribution margin of the product
Sales quantity variance - Hamburger:
$14,000 F = (400,000 - 350,000) × 0.5 × Budget CM Hamburger
Budget CM Hamburger = $0.56
Sales quantity variance - Cheeseburger:
$15,000 F = (400,000 - 350,000) × 0.375 × Budget CM Cheeseburger
Budget CM Cheeseburger = $0.8
Sales quantity variance - Fishwich
$1,000 F = (400,000 - 350,000) × 0.125 × Budget CM Fishwich
Budget CM Fishwich = $0.16
6. Actual sales mix of each of the products
Sales mix variance of a product
= Difference in sales mix of the product x
Total units sold for all products x
Budgeted contribution margin per unit of the product
Hamburger:
$2,240 U = (Actual Sales Mix Hamburger - 0.5) × 400,000 × $.56
Actual Sales Mix Hamburger – 0.5 = -0.01
Actual Sales Mix Hamburger = 0.49
Cheeseburger:
$4,800 U = (Actual Sales Mix Cheeseburger - 0.375) × 400,000 × $.8
Actual Sales Mix Cheeseburger – 0.375 = -0.015
Actual Sales Mix Cheeseburger = 0.36
Fishwich:
$1,600 F = (Actual Sales Mix Fishwich - 0.125) × 400,000 × $.16
Actual Sales Mix Fishwich - 0.125 = 0.025
Actual Sales Mix Fishwich = 0.15
7. Budget and actual units sold for each of the products

Budget Sales Units
Budgeted Total UnitBudgeted Sales MixBudgeted Sales Units
Hamburger 350,000 × .5 = 175,000
Cheeseburger 350,000 × .375 = 131,250
Fishwich 350,000 × .125 = 43,750
Total Budget Units 350,000
Actual Sales Units
Total Actual Unit Actual Sales MixActual Sales Units
Hamburger 400,000 × .49 = 196,000
Cheeseburger 400,000 × .36 = 144,000
Fishwich 400,000 × .15 = 60,000
Total Actual Units 400,000

Blooms: Apply
Difficulty: 3 Hard
variances.
Topic: Variance

133. Lau & Lau, Ltd. of Hong Kong manufacture two products for the same market. Its budget and operating
results for the year just completed follow:
Budget Actual
Unit of sales
Product A 30,000 35,000
Product B 60,000 65,000
Contribution margin per unit
Product A $4.00 $3.00
Product B 10.00 12.00
Selling price per unit
Product A $10.00 $12.00
Product B 25.00 24.00
At the time of budget preparation, the budgeting department and sales department agreed that the
industry volume for the year would likely be 1,500,000 units. Actual industry volume turned out to be
2,000,000 units.
Required:
(you may round fractions to three decimal places)
1. What is the average budgeted contribution margin per unit?

2. What is the sales volume contribution margin variance for each product?
3. What is the sales mix contribution margin variance for each product?
4. What is the sales quantity contribution margin variance for each product?
5. What is the market size contribution margin variance?
6. What is the market share contribution margin variance?
7. What is the total flexible budget contribution margin variance?
8. What is the total variable cost price variance if the total contribution margin price variance is
$50,000 favorable?
9. What is the total variable cost efficiency variance if the total contribution margin price variance is
$50,000 favorable?

1.
Product A Product B Total

Budgeted sales unit 30,000 60,000 90,000
Budgeted contribution margin per unit × $4.00 × $10.00
Budgeted total contribution margin $120,000 $600,000 $720,000
Budgeted average contribution margin per unit $8.00
2.
Product
Product B Total
A
Actual units sold 35,000 65,000
Budgets sales unit - 30,000 - 60,000
Differences in sales units 5,000 5,000
Budgeted CM per unit × $4.00 × $10.00
Sales volume CM variance $20,000 F $50,000 F $70,000 F
3.
Sales mix for Products A and B:

Budgeted Unit % Actual Unit %
Product A 30,000 1/3 35,000 35
Product B 60,000 2/3 65,000 65
TOTAL 90,000 100 100,000 100
Sales mix contribution margin variance:

Product A: (.35 - .33333) × 100,000 × $4 = $6,667 F
Product B: (.65 - .66667) × 100,000 × $10 = 16,667 U
Totals sales mix contribution margin variance $10,000 U
4.
Sales quantity contribution margin variance:

Product A: (100,000 - 90,000) × .33333 × $4 = $13,333 F
Product B: (100,000 - 90,000) × .66667 × $10 = 66,667 F
Total sales quantity CM variance $80,000 F
5. Weighted average budget contribution margin per unit: $8.00 (calculated in part 1)
Market size contribution margin variance:

(2,000,000 - 1,500,000) × (90,000 ÷ 1,500,000) × $8 = $240,000 F
6. Market share contribution margin variance:

(100,000 ÷ 2,000,000 - 90,000 ÷ 1,500,000) × 2,000,000 × 8 = $160,000 U
7. Flexible budget contribution margin variance:
Total Contribution
CM Flexible
Margin
Budget
Actual Operating Result

Flexible Budget
Variance
Product A 35,000 × $3 = $105,000 35,000 × $4 = $140,000 $35,000 U
Product B 65,000 × $12 = $780,000 65,000 × $10 = 650,000 $130,000 F
TOTAL $885,000 $790,000 $95,000 F
8.
Total contribution margin price variance (given) $50,000 F

Selling price variance:
Product A: ($12 - $10) × 35,000 = $70,000 F
Product B: ($24 - $25) × 65,000 = $65,000 U
Total selling price variance -5,000 F
Total variable cost price variance $45,000 F
9.
Total flexible budget contribution margin variance $95,000 F

Total contribution margin price variance (given) -50,000 F
Total variable cost efficiency variance $45,000 F

Blooms: Apply
Difficulty: 3 Hard
variances.
Topic: Variance

134. Showtime is a group of aspiring musicians and actors who perform in theaters and dinner clubs. It has a
matinee and evening show. These operating data pertain to the month of July:
Master budget data

Total number of shows 100 (evening 70; matinee 30)
Contribution margin per show:
Matinee $240
Evening $600
Actual operating results
Number of shows 90 (36 evening, 54 matinee)
Required:
1. Calculate each variance by individual type of show and also show the combined total of each
variance for both types of shows:
a. Sales mix variances.

b. Sales quantity variances.
c. Sales volume variances.
2. What strategic implications can you draw from the variances?

1.
a. Sales mix variance:

Matinee: (.6 - .3) × 90 × $240 = $6,480 F
Evening: (.4 - .7) × 90 × $600 = 16,200 U
Total sales mix variance $9,720 U
b. Sales quantity variance:

Matinee: (90 - 100) × .3 × $240 = $720 U
Evening: (90 - 100) × .7 × $600 = 4,200 U
Total sales quantity variance $4,920 U
c. Sales volume variance:

Matinee: (54 - 30) × $240 = $5,760 F
Evening: (36 - 70) × $600 = 20,400 U
Total sales volume variance $14,640 U
2. The group performed more matinee shows than the budgeted amount in both the number of shows
and the relative proportion of the total number of shows the group performed. The evening shows,
which offered a higher contribution margin per show than that of a matinee, are less than the budgeted
amount. While there are many reasons for the increased popularity of the matinee including the
economy of the area and competition, the quality of the matinee shows meets the expectation of the
audience. The group, however, needs to improve its evening shows to differentiate these shows from
competitors.

Blooms: Apply
variances.
Topic: Variance

Operational Performance Measurement: Further Analysis of Productivity and Sales

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Operational Performance Measurement: Further Analysis of Productivity and Sales

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Chapter 16

Operational Performance Measurement: Further Analysis of Productivity and

Multiple Choice Questions

A. Partial financial productivity.

A. Partial financial productivity.

A. The relationship between what is produced and the capacity to produce.

A. Uses physical units in both the numerator and denominator.

A. Market size and market share.

A. Sales mix and sales quantity variances.

A. Sales mix variance is favorable.

A. In the total market size of the firm's product.

A. Will always generate higher sales volumes and market shares.

A. Market as a whole is also declining.

A. Actual total contribution margin ÷ actual total units.

A. Sales efficiency variance.

A. Sales efficiency variance.

A. Sales efficiency variance.

A. Sales efficiency variance.

A. Market mix variance.

A. Market mix variance.

A. The industry is in decline.

Budgeted production 10,000 units

What is the actual partial operational productivity ratio?

A. 0.97 unit per gallon.

Budgeted production 12,000 units

A. 0.92 units per gallon.

The partial operational productivity ratio of DTV-12 in 2015 is:

A. 0.63 per unit.

The partial operational productivity ratio of DTV-12 in 2016 is:

A. 0.63 per unit.

A. 262 per unit.

A. 262 per unit.

The partial financial productivity ratio of DTV-12 in 2015 is:

The partial financial productivity ratio of DTV-12 in 2016 is:

450 pounds of Material A at a cost of $1.50 per pound

500 pounds of Material A at a cost of $1.20 per pound

Round all calculations to two significant digits.

In 2016, the partial operational productivity of Material A is:

450 pounds of Material A at a cost of $1.50 per pound

500 pounds of Material A at a cost of $1.20 per pound

Round all calculations to two significant digits.

In 2016, the partial operational productivity of Material H is:

450 pounds of Material A at a cost of $1.50 per pound

500 pounds of Material A at a cost of $1.20 per pound

Round all calculations to two significant digits.

In 2016, the partial direct labor operational productivity is:

450 pounds of Material A at a cost of $1.50 per pound

500 pounds of Material A at a cost of $1.20 per pound

Round all calculations to two significant digits.

In 2016, the partial financial productivity of Material A is:

450 pounds of Material A at a cost of $1.50 per pound

500 pounds of Material A at a cost of $1.20 per pound

Round all calculations to two significant digits.

In 2016, the partial financial productivity of Material H is:

450 pounds of Material A at a cost of $1.50 per pound

500 pounds of Material A at a cost of $1.20 per pound

Round all calculations to two significant digits.

In 2016, the partial financial productivity of direct labor is:

450 pounds of Material A at a cost of $1.50 per pound

500 pounds of Material A at a cost of $1.20 per pound

Round all calculations to two significant digits.

The total productivity ratio in 2016 is:

450 pounds of Material A at a cost of $1.50 per pound