Contribution Margin Volume Variance Iliff, Inc., produces and sells two types of

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:

Actual Amounts:

Required:

1. Calculate the budgeted average unit contribution margin. Round your answer to the nearest cent.
$ per unit

2. Calculate the contribution margin volume variance.
$ Unfavorable

Toaster
Oven Convection
Oven Total Sales:     ($90 × 25,000) $2,250,000       ($150 × 15,000) $2,250,000   $4,500,000   Variable expenses 500,000   750,000   1,250,000       Contribution margin $1,750,000   $1,500,000   $3,250,000  

Explanation / Answer

1) average unit contribution margin = total contribution/ unit =$3,250,000/(25000+15000)

=81.25.

2)contribution margin volume variance =

( Actual quantity sold-budgeted quantity )× budgeted average contribution.

   = (25,800+14,000)-(25,000+15,000) × 81.25

   = $16250 adverse.

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