Chow-4-Hounds (C4H) makes pet food for sale in supermarkets. C4H produces two ge

Question

Chow-4-Hounds (C4H) makes pet food for sale in supermarkets. C4H produces two general types: Branded and Generic. The two differ primarily in the ingredients used. At budget, Branded sells for $29 per case and has a variable cost to produce of $22 per case. Generic sells for a budgeted $26 per case and has a budgeted variable cost to produce of $21 per case. C4H expects to sell 20 percent Branded and 80 percent Generic regardless of the sales volume. C4H budgeted total sales of 217,000 cases for March. Actual case volume sold in March was 244,000 cases, of which 68,500 were Branded. Total actual revenues in March were $2,072,000, of which $788,500 were from sales of Branded cases.

Required:

a. Compute the activity variance for C4H for March. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

b. Compute the mix and quantity variances for March. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

Explanation / Answer

a. Computation of Activity Variance Particular Branded Generic Total Mix Ratio 20% 80% Budgeted sales (a) ( Sales * Mix Ratio)               43,400          173,600     217,000 Actual Sales (b)               68,500          175,500     244,000 Difference (c=a-b)            (25,100)             (1,900) Budgeted Contribution ( d) $29-$22=$7 $26-$21=$5 Activity variance (c*d) -$175,700 -$9,500 Favourable Favourable Activity variance (Budgeted Sales - Actual Sales) X  Budgeted Contr. Margin Per Unit b(i)Computation of Mix Variance Particular Branded Generic Total Budgeted mix 20% 80% Actual sold mix required (a)               48,800          195,200     244,000 Actual sold (b)               60,000          150,000 Difference(c=a-b)            (11,200)             45,200 Margin (C*d) $7 $5 Mix Variance -$78,400 $226,000 Favourable Unfavorable Mix variance (Budgeted Sales -  Actual Sales) X  Budgeted Contr. Margin Per Unit Computation of Quanity Variance Particular Branded Generic Total Budgeted mix 20% 80% Actual sold mix required (a)               48,800          195,200     244,000 Actual sold (b)               60,000          150,000 Difference(c=a-b)            (11,200)             45,200 Standard Cost (d) $22.00 $21.00 Qty Varaince(cXd) -$246,400 $949,200 Favourable Unfavorable Mix variance (Budgeted Sales -  Actual Sales) X Std. Cost per Unit

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