# 1 and 2 solution presents the sales volume sales

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1. and 2. Solution Exhibit 14-24 presents the sales-volume, sales-quantity, and sales-mix variances for the Plain and Chic wine glasses and in total for Jinwa Corporation in June 2006. The steps to fill in the numbers in Solution Exhibit 14-24 follow: Step 1 Consider the static budget column (Column 3): Static budget total contribution margin \$5,600 Budgeted units of all glasses to be sold 2,000 Budgeted contribution margin per unit of Plain \$2 Budgeted contribution margin per unit of Chic \$6 Suppose that the budgeted sales-mix percentage of Plain is y. Then the budgeted sales- mix percentage of Chic is (1 y). Therefore, (2,000y \$2) + (2,000 (1 y) \$6) = \$5,600 \$4000y + \$12,000 \$12,000y = \$5,600 \$8,000y = \$6,400 y = 0.8 or 80% 1 y = 20% Jinwa s budgeted sales mix is 80% of Plain and 20% of Chic. We can then fill in all the numbers in Column 3. Step 2 Next, consider Column 2 of Solution Exhibit 14-24. The total of Column 2 in Panel C is \$4,200 (the static budget total contribution margin of \$5,600 the total sales-quantity variance of \$1,400 U which was given in the problem). We need to find the actual units sold of all glasses, which we denote by q. From Column 2, we know that (q 0.8 \$2) + (q 0.2 \$6) = \$4,200 \$1.6q + \$1.2q = \$4,200 \$2.8q = \$4,200 q = 1,500 units So, the total quantity of all glasses sold is 1,500 units. This computation allows us to fill in all the numbers in Column 2.
14-18 Step 3 Next, consider Column 1 of Solution Exhibit 14-24. We know actual units sold of all glasses (1,500 units), the actual sales-mix percentage (given in the problem information as Plain, 60%; Chic, 40%), and the budgeted unit contribution margin of each product (Plain, \$2; Chic, \$6). We can therefore determine all the numbers in Column 1. Solution Exhibit 14-24 displays the following sales-quantity, sales-mix, and sales-volume variances: Sales-Volume Variance Plain \$1,400 U Chic 1,200 All Glasses \$ 200 Sales-Mix Variances Sales-Quantity Variances Plain \$ 600 U Plain \$ Chic 1,800 F Chic 600 All Glasses \$1,200 F All Glasses \$1,400 3. Jinwa Corporation shows an unfavorable sales-quantity variance because it sold fewer wine glasses in total than was budgeted. This unfavorable sales-quantity variance is partially offset by a favorable sales-mix variance because the actual mix of wine glasses sold has shifted in favor of the higher contribution margin Chic wine glasses. The problem illustrates how failure to achieve the budgeted market penetration can have negative effects on operating income. F U 800 U U U
14-19 SOLUTION EXHIBIT 14-24 Columnar Presentation of Sales-Volume, Sales-Quantity and Sales-Mix Variances for Jinwa Corporation Flexible Budget: Actual Units of All Glasses Sold Actual Sales Mix Budgeted Contribution Margin per Unit Actual Units of All Glasses Sold Budgeted Sales Mix Budgeted Contribution Margin per Unit Static Budget: Budgeted Units of All Glasses Sold Budgeted Sales Mix Budgeted Contribution Margin per Unit Panel A: Plain (1,500 0.6) \$2 900 \$2 (1,500 0.8) \$2 1,200 \$2 (2,000 0.8) \$2 1,600 \$2 \$1,800 \$2,400 \$3,200 \$600 U \$800 U Sales-mix variance Sales-quantity variance \$1,400 U Sales-volume variance Panel B: Chic (1,500 0.4) \$6 600 \$6 (1,500 0.2) \$6 300 \$6 (2,000 0.2) \$6 400 \$6 \$3,600 \$1,800 \$2,400 \$1,800 F \$600 U Sales-mix variance Sales-quantity variance \$1,200 F Sales-volume variance Panel C: All Glasses \$5,400 \$4,200 \$5,600 \$1,200 F \$1,400 U