Sales-Mix and Sales-Quantity Variance Analysis of Space Infonautics for the Third Quarter

2017.

Flexible Budget: Static Budget:

Actual Units of Actual Units of Budgeted Units of
All Products Sold All Products Sold All Products Sold
 Actual Sales Mix  Budgeted Sales Mix  Budgeted Sales Mix
 Budgeted Contribution  Budgeted Contribution  Budgeted Contribution
Margin Per Unit Margin Per Unit Margin Per Unit

MobilePro 115,000  0.04  $195 = $ 897,000 115,000  0.05  $195 = $ 1,121,250

111,000  0.05  $195 = $ 1,082,250

MobileCE 115,000  0.43  $177 = 8,752,650 115,000  0.40  $177 = 8,142,000

111,000  0.40  $177 = 7,858,800

MobileKid 115,000  0.53  $ 81 = 4,936,950 115,000  0.55  $ 81 = 5,123,250

111,000  0.55  $ 81 = 4,945,050

$14,586,600 $14,386,500
$13,886,100
$200,100 F $500,400 F
Sales-mix variance Sales-quantity variance
$700,500 F
Sales-volume variance

F = favorable effect on operating income; U= unfavorable effect on operating income

4. The following factors help explain the difference between actual and budgeted amounts:

 The difference in actual versus budgeted quantities multiplied by the budgeted

contribution margins was $700,500 favorable ($14,586,600  $13,886,100). The
contribution margins from MobilePro and the MobileKid were lower than expected,
but the contribution margin from MobileCE was much higher and more than the
lower margins on MobilePro and MobileKid.
 In percentage terms, the MobileCE accounted for 60% $8,752,650 ÷ $14,586,600) of
contribution margin at budgeted rates for actual quantities sold versus a planned 56%
($7,858,800 ÷ $13,886,100) budgeted contribution margin. However, the MobilePro
accounted for 6% ($897,000 ÷ $14,586,600) versus planned 8% ($1,082,250 ÷
13,886,100) and the MobileKid accounted for 34% $4,936,950 ÷ $14,586,100) versus
a planned 36% ($4,945,050 ÷ $13,886,100).
  In unit terms (rather than in contribution terms), the MobileCE accounted for 43% of
the sales mix, a little more than the planned 40%. However, the MobilePro accounted
for only 4% versus a budgeted 5%, and the MobileCE accounted for 53% versus a
planned 55%.
 Variance analysis for the MobilePro and MobileKid shows an unfavorable sales-mix
variance but a favorable sales-quantity variance producing an unfavorable sales-
volume variance.
 The MobileCE gained sales-mix share at 43%—as a result, the sales-mix variance is
positive. MobileCE also had a favorable sales quantity variance and a favorable sales
volume variance.
 Overall, there was a favorable total sales-volume variance. However, the large drop in
MobilePro’s and MobileKid’s actual contribution margin per unit relative to the
budgeted contribution margin per unit combined with a decrease in the actual number
of MobilePro and MobileKid units sold led to the total contribution margin being
much lower than budgeted despite MobileCE’s higher actual contribution margin per
unit relative to the budget and the higher number of actual units sold relative to the
budget.

Other factors could be discussed here—for example, it seems that the MobileKid did not achieve
much success with a much lower price point—selling price was budgeted at $146 but dropped to
$115. At the same time, variable costs increased. This could have been due to a marketing push
that did not succeed.