(Appendix 11A)Yukon Company expressed the total expenses (Y)component of its master budget for March with the cost formula Y = $100,000 + $40*X,where X represents the expected number of units of its only product to be manufactured and sold.The budgeted average selling price per unit was $65 for budgeted sales volume 5,000 units based on an estimated industry volume of 50,000 units.Reported actual results for February were as follows:

$\begin{array} { l r }
\text { Sales } & \underline { 5,400 \text { units* } } \
\text { Sales revenue } & \$ 324,000 \
\text { Less variable costs } & \underline { 194.400 } \
\text { Contribution margin } & \$ 129,600 \
\text { Less fixed expenses } & \underline { 102.000 } \
\text { Operating income } & \$ 27.600 \
\end{array}$

*Actual industry sales volume was 60,000 units.

Required:

a) Calculate the flexible budget variance and analyze it into sales price variance and cost/expense variance(s).
b) Calculate the sales volume variance and analyze it into market-size (industry volume) variance and market-share variance.
c) On the basis of your analysis in parts (a) and (b), would you recommend a bonus be paid to the sales manager? Why or why not?

Question

(Appendix 11A)Yukon Company expressed the total expenses (Y)component of its master budget for March with the cost formula Y = $100,000 + $40*X,where X represents the expected number of units of its only product to be manufactured and sold.The budgeted average selling price per unit was $65 for budgeted sales volume 5,000 units based on an estimated industry volume of 50,000 units.Reported actual results for February were as follows:

$\begin{array} { l r } 
\text { Sales } & \underline { 5,400 \text { units* } } \
\text { Sales revenue } & \$ 324,000 \
\text { Less variable costs } & \underline { 194.400 } \
\text { Contribution margin } & \$ 129,600 \
\text { Less fixed expenses } & \underline { 102.000 } \
\text { Operating income } & \$ 27.600 \
\end{array}$

*Actual industry sales volume was 60,000 units.

Required:

a) Calculate the flexible budget variance and analyze it into sales price variance and cost/expense variance(s).
b) Calculate the sales volume variance and analyze it into market-size (industry volume) variance and market-share variance.
c) On the basis of your analysis in parts (a) and (b), would you recommend a bonus be paid to the sales manager? Why or why not?

Quizplus · Accepted Answer

The Answer of (Appendix 11A)Yukon Company expressed the total expenses (Y)component of its master budget for March with the cost formula Y = $100,000 + $40*X,where X represents the expected number of units of its only product to be manufactured and sold.The budgeted average selling price per unit was $65 for budgeted sales volume 5,000 units based on an estimated industry volume of 50,000 units.Reported actual results for February were as follows:

$\begin{array} { l r } 
\text { Sales } & \underline { 5,400 \text { units* } } \
\text { Sales revenue } & \$ 324,000 \
\text { Less variable costs } & \underline { 194.400 } \
\text { Contribution margin } & \$ 129,600 \
\text { Less fixed expenses } & \underline { 102.000 } \
\text { Operating income } & \$ 27.600 \
\end{array}$

*Actual industry sales volume was 60,000 units.

Required:

a) Calculate the flexible budget variance and analyze it into sales price variance and cost/expense variance(s).
b) Calculate the sales volume variance and analyze it into market-size (industry volume) variance and market-share variance.
c) On the basis of your analysis in parts (a) and (b), would you recommend a bonus be paid to the sales manager? Why or why not?

(Appendix 11A)Yukon Company Expressed the Total Expenses (Y)component of Its