Question

Consider an example of a new car sale yard and the managers predicted that they would sell 1,400 of model A and 1,800 of model B in the fiscal year. They would prepare their budget accordingly. Sales of model A did not meet expectations and sold 1,200 units. Model B had sales rise to 2,400 vehicles for the year. The expected margin on each vehicle is $2,000 for model A and $3,000 for model B.

Calculate the predicted and actual sales mix and the impact of the variations on income

Answer 1

Income from Sale of Cars in Predicted Sales Mix :-

Particulars	Model A	Model B
No. of Car Sale (a)	1400	1800
Profit Margin Per Car (b)	$2000	$3000
Total Profit Margin (a*b)	$2800000	$5400000

Income from Sale of Cars in Actual Sales Mix :-

Particulars	Model A	Model B
No. of Car Sale (a)	1200	2400
Profit Margin Per Car (b)	$2000	$3000
Total Profit Margin (a*b)	$2400000	$7200000

Impact of the Variations on Income :-

Particulars	Model A	Model B	Total
Predicted Sales Mix	$2800000	$5400000	$8200000
Actual Sales Mix	$2400000	$7200000	$9600000
Difference in Income/(Loss)	($400000)	$1800000	$1400000