Kay\'s Auto Products budgeted sales of 36,000 units of product B, assuming that

Question

Kay's Auto Products budgeted sales of 36,000 units of product B, assuming that the company would have 18 percent of 200,000 units sold in a particular market. The actual results were 19,280 units, based on a 8 percent share of a total market of 241,000 units. The budgeted contribution margin is $5 per unit.

Compute the sales activity variance, and break it down into market share and industry volume. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Omit the "$" sign in your response.)

Kay's Auto Products budgeted sales of 36,000 units of product B, assuming that the company would have 18 percent of 200,000 units sold in a particular market. The actual results were 19,280 units, based on a 8 percent share of a total market of 241,000 units. The budgeted contribution margin is $5 per unit.

Explanation / Answer

Flexible Budget (SCM x AQ) = $5 x 19,280 = $96,400

Standard Contribution Margin Times Budgeted

Market Share Times Actual Industry Volume (SCM x ASQ) = $5 x 18% x 241,000 = $216,900

Master Budget (SCM x SQ) = $5 x 18% x 200,000 = $180,000

Master Share Variance = ( $96,400 - $216,900) = $120,500 U

Industry Volume Variance = ($216,900 - $180,000) = $36,900 F

Sales Activity Variance = ($120,500 U - 36,900 F) = $83,600 U

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