Alternatively clarksons selling price increases may

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Alternatively, Clarkson’s selling price increases may have been lower than competitors’ priceincreases. Understanding the reasons why actual results differ from budgeted amounts can helpClarkson better manage its costs and pricing decisions in the future. The important lesson learnedhere is that a superficial examination of summary level data (Levels 0 and 1) may be insufficient.It is imperative to scrutinize data at a more detailed level (Level 2). Had Clarkson not been ableto pass costs on to customers, losses would have been considerable.
7-8$15,000 FTotal sales volume variance$15,000 UTotal flexible-budget variance$0Total static-budget variance
7-25Flexible-budget and sales volume variances. Cascade, Inc., produces the basic fillings used in many popular frozen desserts andtreats—vanilla and chocolate ice creams, puddings, meringues, and fudge. Cascade uses standard costing and carries over no inventoryfrom one month to the next. The ice-cream product group’s results for June 2017 were as follows:Jeff Geller, the business manager for ice-cream products, is pleased that more pounds of ice cream were sold than budgeted and that rev-enues were up. Unfortunately, variable manufacturing costs went up, too. The bottom line is that contribution margin declined by $52,900,which is just over 2% of the budgeted revenues of $2,592,600. Overall, Geller feels that the business is running fine.Required:1.Calculate the static-budget variance in units, revenues, variable manufacturing costs, and contribution margin. What percentageis each static-budget variance relative to its static-budget amount?2.Break down each static-budget variance into a flexible-budget variance and a sales-volume variance.3.Calculate the selling-price variance.4.Assume the role of management accountant at Cascade. How would you present the results to Jeff Geller? Should he be more con-cerned? If so, why?SOLUTION(30-40 min.) Flexible budget and sales volume variances, market-share and market-size variances.1. and 2.7-9
Performance Report for Cascade, Inc., June 2017ActualFlexibleBudgetVariancesFlexibleBudgetSales VolumeVariancesStaticBudgetStatic BudgetVarianceStatic BudgetVariance as % of StaticBudget(1)(2) = (1) – (3)(3)(4) = (3) – (5)(5)(6) = (1) – (5)(7) = (6) (5)Units (pounds)460,000- 460,00013,000 F447,000 13,000F2.91%Revenues$2,626,600$ 41,400 U$2,668,000a$75,400 F$2,592,600 $34,000 F1.31%Variable mfg. costs1,651,40041,400 U1,610,000b45,500 U1,564,500 86,900 U5.55%Contribution margin$975,200 $ 82,800 U$1,058,000$ 29,900F$1,028,100$52,900 U5.15%$82,800U$ 29,900FFlexible-budget varianceSales-volume variance$52,900 UStatic-budget variancea Budgeted selling price = $2,592,600 ÷ 447,000 lbs = $5.80 per lb.Flexible-budget revenues = $5.80 per lb. × 460,000 lbs. = $2,668,000b Budgeted variable mfg. cost per unit = $1,564,500 ÷ 447,000 lbs. = $3.50Flexible-budget variable mfg. costs = $3.50 per lb. × 460,000 lbs. = $1,610,0007-10

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