Given an actual market for ice cream of 64,000 litres, forecasted market for ice cream of 60,000 litres, actual sales of 3,200 litres, projected market share of 4.75%, and a standard contribution margin of $1.30. What is the contribution margin variance?

Question

Quizplus · Accepted Answer

Firstly, let's calculate the expected contribution margin based on the projected market share:
Expected Sales = Forecasted Market * Projected market share
Expected Sales = 60,000 * 0.0475
Expected Sales = 2,850 litres

Contribution Margin = Expected Sales * Standard Contribution Margin
Contribution Margin = 2,850 * $1.30
Contribution Margin = $3,705

Now, we can calculate the contribution margin variance:

Contribution Margin Variance = Actual Contribution Margin - Expected Contribution Margin
Actual Contribution Margin = Actual Sales * Standard Contribution Margin
Actual Contribution Margin = 3,200 * $1.30
Actual Contribution Margin = $4,160

Expected Contribution Margin = $3,705

Contribution Margin Variance = $4,160 - $3,705
Contribution Margin Variance = $455F (F = favorable variance)

Therefore, the best choice is D because the contribution margin variance is $455F.

Given an Actual Market for Ice Cream of 64,000 Litres