5. Synor Coffee, Inc., sells two types of coffee, Colombian and Blue Mountain. T

Question

5.

Synor Coffee, Inc., sells two types of coffee, Colombian and Blue Mountain. The monthly budget for U.S. coffee sales is based on a combination of last year's performance, a forecast of industry sales, and the company's expected share of the U.S. market. The following information is provided for March:

                                                            Actual                                                Budget

  Colombian    Blue Mountain       Colombian     Blue Mountain

Sales in pounds             15,000 lbs.          17,000 lbs.           13,500 lbs.            18,000 lbs

Price per pound $13.00                  $16.00                   $13.00                  $16.00

Variable cost per pound         5.50                       8.50                       6.50                       8.00

Contribution margin             $7.50                    $7.50                     $6.50                    $8.00

Budgeted and actual fixed corporate-sustaining costs are $60,000 and $72,000, respectively.

Required:

a.     Calculate the actual contribution margin for the month.

b.     Calculate the contribution margin for the static budget.

c.     Calculate the contribution margin for the flexible budget.

d.    Determine the total static-budget variance, the total flexible-budget variance, and the total sales-volume variance in terms of the contribution margin.

Explanation / Answer

Synor Coffee Inc. All Amounts in $ a. Actual contribution margin for the month Colombian Coffee 105000 $ 7.50 X 15,000 lbs Blue Mountain Coffee 127500 $ 7.50 X 17,000 lbs 232500 b. Contribution Margin for the Static Budget Colombian Coffee 87750 $ 6.50 X 13,500 lbs Blue Mountain Coffee 144000 $8 X 18,000 lbs 231750 c. Contribution Margin for the Flexible Budget Colombian Coffee 97500 $ 6.50 X 15,000 lbs Blue Mountain Coffee 136000 $8 X 17,000 lbs 233500 d. Static Budget Variance = Static Budget Contribution Margin - Actual Contribution Margin = $ 231,750 - $ 232,500 = $ 750 Favourable Flexible Budget Variance = Flexible Budget Contribution Margin - Actual Contribution Margin = $ 233,500 - $ 232,500 = $ 1,000 Unfavourable Sales Volume Variance Colombian Coffee 19500 Favourable Blue Mountain Coffee -16000 Unfavourable Total Sales Volume Variance 3500 Favourable

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