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ADMS 3510 W 2010 Alternate Mid-term 2 Solutions

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AK/ADMS 3510 3.0: Winter 2010: Sections O, M: Alternate Mid-Term #2: Saturday 13th March 2010: SOLUTIONS:

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Question 1: (25 marks) The Shelburne Shelties play in local hockey league. In October they budgeted to sell 2,000 seats in their arena. The arena can actually hold 3,000 at capacity. Seats are either Gold or Red. Gold seats sell for \$20 each and Reds sell for \$10. All seats sold require the Shelties to pay \$5 to the arena management. The budget was set at 500 Gold plus 1,500 Red. The actual sales in October were 2,500, of which 400 were Gold and 2,100 were Red. Required: calculate the sales quantity variance, sales mix variance and sales volume variance for each seat type and in total (based on contribution margin); (20 marks) Gold Red Total Budget: 500 1,500 2,000 % 25% 75% Actual: 400 2,100 2,500 16% 84% Selling price: \$20 \$10 Variable cost: 5 5 Contribution margin: \$15 \$ 5
Gold: Actual sales in Actual sales Budgeted sales Actual mix in budgeted mix in budgeted mix 400 * \$15 2,500 * 25% * \$15 2,000 * 25% * \$15 \$6,000 \$9,375 \$7,500 Mix Quantity Volume variance variance variance \$3,375 U \$1,875 F \$1,500 U Red 2,100 * \$5 2,500 * 75% * \$5 2,000 * 75% * \$5 \$10,500 \$9,375 \$7,500 Mix Quantity Volume Variance variance variance \$1,125 F \$1,875 F \$3,000 F Total: \$2,250 U \$3,750 F \$1,500 F iv) Which are more important: cost related variances or sales related variances? (5 marks). Sales related variances are generally larger and more unpredictable therefore they are more important.

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Question 2: (25 marks) The following information appears on the Air Canada website: Draft an outline of a Balanced Scorecard that would help enact this statement. (20 marks) Is a balanced scorecard appropriate as a management device for an international airline? (5 marks)
Draft Balanced Scorecard for Air Canada: Concept Measure Target Actual

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