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CN14HO - Sales-Variance Analysis Chapter 14 2008 Foster...

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2008 Foster School of Business Accounting 311 L.DuCharme 1 Sales-Variance Analysis Chapter 14
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2008 Foster School of Business Accounting 311 L.DuCharme 2 Calculation of sales variances
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2008 Foster School of Business Accounting 311 L.DuCharme 3 Overview of “Sales” variances Actual Flexible Static Budget Budget |----- Flex. V .-----|-------------- Sales-volume V .---------------| | --- Sales-Mix V .--- | ----------- Sales-Quant.V .------------ | | -- Mkt.-share V . -- | -- Mkt.-size V.-- | Actual Mkt. size x Actual Mkt. share x Actual sales mix x Actual CM /unit Actual Mkt. size x Actual Mkt. share x Actual sales mix x Budget CM /unit Actual Mkt. size x Actual Mkt. share x Budget sales mix x Budget CM /unit Actual Mkt. size x Budget Mkt. share x Budget sales mix x Budget CM /unit Budget Mkt. size x Budget Mkt. share x Budget sales mix x Budget CM /unit
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2008 Foster School of Business Accounting 311 L.DuCharme 4 Things to note: (1) Total number of units of all products sold = market size * market share (2) Number of each product sold = market size * market share * sales mix (3) Average CM / unit = sales mix * CM / unit (4) “Revenue” variances can be calculated by substituting sales price for CM in all of the equations on the prior slide.
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2008 Foster School of Business Accounting 311 L.DuCharme 5 Sales-Volume Variance Components The following information relates to English Languages Institute budget for the year 2003. Product Grammar Trans. Comp. Selling price per unit $259 $87 $185 Variable cost 189 50 95 Contribution margin per unit $ 70 $37 $ 90
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2008 Foster School of Business Accounting 311 L.DuCharme 6 Sales-Volume Variance Components-budget Product Grammar Translation Composition Cont. margin $70 $37 $90 × Units 3,185 980 735 = Total $222,950 $36,260 $66,150 Sales mix 65% 20% 15% Total budgeted contribution margin = $325,360
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2008 Foster School of Business Accounting 311 L.DuCharme 7
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