Question

For planning and control purposes, managers often compare planned and actual contribution margin. Variable costing is used as a basis for such analyses.

Examine the following contribution margin data, and then complete the Contribution Margin Analysis panel.

Saxon, Inc.
Contribution Margin Data Schedule
	Actual	Planned
Sales	$1,275,000	$1,190,000
Variable cost of goods sold	$476,000	$462,000
Variable selling and administrative expenses	221,000	154,000
Total	$697,000	$616,000
Contribution margin	$578,000	$574,000
Number of units sold	17,000	14,000
Per unit:
Sales price	$75.00	$85.00
Variable cost of goods sold	28.00	33.00
Variable selling and administrative expenses	13.00	11.00

Contribution Margin Analysis

Shaded cells have feedback.

Contribution margin analysis focuses on explaining the differences between planned and actual contribution margins, considering the quantity factor and the unit price factor.

After reviewing the data on the Contribution Margin Data panel, complete the following contribution margin analysis. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Score: 15/44

Saxon, Inc.

Contribution Margin Analysis

For the Year Ended December 31

1	Planned contribution margin		✔
2	Effect of changes in sales:
3	Sales quantity factor
4	Unit price factor
5	Total effect of changes in sales
6	Effect of changes in variable cost of goods sold:
7	Variable cost quantity factor
8	Unit cost factor
9	Total effect of changes in variable cost of goods sold		✔
10	Effect of changes in selling and administrative expenses:
11	Variable cost quantity factor
12	Unit cost factor
13	Total effect of changes in selling and administrative expenses
14	Actual contribution margin

Answer 1

Contribution Margin Analysis

1	Planned contribution margin	$574,000
2	Effect of changes in sales:
3	Sales quantity factor [(17000-14000)*85]	$255,000
4	Unit price factor [(75-85) *17000]	-$170,000
5	Total effect of changes in sales	$85000
6	Effect of changes in variable cost of goods sold:
7	Variable cost quantity factor [(14000-170000)*33]	-99000
8	Unit cost factor [(33-28)*17000]	85000
9	Total effect of changes in variable cost of goods sold	-14000
10	Effect of changes in selling and administrative expenses:
11	Variable cost quantity factor [(14000-170000)*11]	-33000
12	Unit cost factor [(11-13)*17000]	-34000
13	Total effect of changes in selling and administrative expenses	-67000
14	Actual contribution margin [574000+85000-14000-67000]	$578,000