Question

How can the concept of a composite unit be used to explain why an unfavorable total sales-mix variance of contribution margin occurs?

How can the extent of price discounting be tracked on a customer-by-customer basis?

answer both questions in your own words, ty

Answer 1

The total sales mix variance arises from differences in the budgeted contribution margin of the actual and budgeted sales mix. The composite unit concept enables the effect of individual product changes to be summarized in a single intuitive number by using weights based on the mix of individual units in the actual and budgeted mix of product sold.

The extent of price discounting can be tracked on a customer to customer basis by the companies, by separately recording:

• The list price and,
• The discount

Then they have sufficient information to subsequently examine the level of discounting by each individual customer and by individual salesperson.