Question

The managemnet of enterprises was reviewing the results at year end and noted the following: Product...

The managemnet of enterprises was reviewing the results at year end and noted the following:

Product

Budgeted contributionmargin per unit

 Budgeted sales volume Actual sales voulme
X $125 65,000 75,000
Y $110 60,000 45,000
Z $105 75,000 80,000
Total 200,000 200,000

What is the sales mix variance?

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Answer #1

Sales mix variance

= Budgeted contribution Per unit * ( Actual sales in Units - Actual sales Units in Budget mix %)

Product Contribution Per Unit Actual Units -   Act Units in Budget Mix Variance F/U
X 125 75000 - 65000 1250000 F
Y 110 45000 - 60000 -1650000 U
Z 105 80000 - 75000 525000 F
125000 F

In the given question, we see total number of units are same for budget and actual. Hence when we put the actual sales in budget mix we have same numbers like budget sales coming for actual sales in budgeted mix.

Thus this company had 125,000 Favorable sale mix variance.

Note: For sales, excess of actual over budget represents a favorable variance, since its a revenue.

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