Question

Contribution Margin Volume Variance

Iliff, Inc., produces and sells two types of countertop ovens—the toaster oven and the convection oven. Budgeted and actual data for the two models are shown below.

Budgeted Amounts:

		Toaster Oven		Convection Oven		Total
Sales:
($90 × 29,500)		$2,655,000
($149 × 15,000)				$2,235,000		$4,890,000
Variable expenses		455,000		850,000		1,305,000
Contribution margin		$2,200,000		$1,385,000		$3,585,000

Actual Amounts:

		Toaster Oven		Convection Oven		Total
Sales:
($84 × 24,000)		$2,016,000
($163 × 13,000)				$2,119,000		$4,135,000
Variable expenses		583,600		739,000		1,322,600
Contribution margin		$1,432,400		$1,380,000		$2,812,400

Required:

1. Calculate the budgeted average unit contribution margin. Round your answer to the nearest cent. Use rounded answer in subsequent computations.
$ per unit

2. Calculate the contribution margin volume variance.

$ Unfavorable

Answer 1

1.)

Calculation of budgeted average unit contribution marrgin
	Toaster Oven	Convection Oven
Sales	$        2,655,000	$        2,235,000
Less : Variable costs	455000	850000
Contribution margin	$        2,200,000	$        1,385,000
Number of units	29,500	15,000
Contribution Margin per unit	$                74.58	$                92.33
(Contribution / Number of units)

2) Contribution margin volume variance =(Actual quantity sold -Budgeted quantity sold) * Budgeted  average unit contribution margin

	Toaster Oven	Convection Oven
Actual quantity sold	24000	13000
Budgeted quantity	29500	15000
	-5500	-2000
Budget average unit contribution margin	$                74.58	$                92.33
Contribution margin volume variance	$         (410,190)	$         (184,660)
	Unfavorable	Unfavorable