Question 1

Use the information below to answer the following question(s).Special Tea Products (STP)has an exclusive contract with Tea Distributors.Two brands of Teas are imported, Strong and Mild, and sold to retail outlets.The monthly budget for the contract is based on a combination of last year's performance, a forecast of general industry sales, and the company's expected share of the Canadian market for imported Tea.The following information is provided for the month of May:
  Budgeted fixed costs are $1,750.Actual fixed costs are $2,000.
-What is the STP total static-budget variance for revenues?

Accepted Answer

The answer of Use the information below to answer the...

Question 2

Use the information below to answer the following question(s).Special Tea Products (STP)has an exclusive contract with Tea Distributors.Two brands of Teas are imported, Strong and Mild, and sold to retail outlets.The monthly budget for the contract is based on a combination of last year's performance, a forecast of general industry sales, and the company's expected share of the Canadian market for imported Tea.The following information is provided for the month of May:
  Budgeted fixed costs are $1,750.Actual fixed costs are $2,000.
-What is the STP total sales-quantity variance for revenues?

Accepted Answer

The STP total sales-quantity variance for revenues is $0 because it measures the difference between the actual sales quantity and the budgeted sales quantity, and if there is no difference, the variance is zero.

Question 3

Use the information below to answer the following question(s).Special Tea Products (STP)has an exclusive contract with Tea Distributors.Two brands of Teas are imported, Strong and Mild, and sold to retail outlets.The monthly budget for the contract is based on a combination of last year's performance, a forecast of general industry sales, and the company's expected share of the Canadian market for imported Tea.The following information is provided for the month of May:
  Budgeted fixed costs are $1,750.Actual fixed costs are $2,000.
-What is the STP total sales-mix variance for contribution margin?

Accepted Answer

The sales-mix variance is calculated as follows:
Actual sales mix = (actual unit sales of Strong tea ÷ total actual unit sales) = (2500 ÷ 4500) = 0.556
Budgeted sales mix = (budgeted unit sales of Strong tea ÷ total budgeted unit sales) = (3000 ÷ 5000) = 0.6
Contribution margin per unit for Strong tea = ($3.50 - $2.50) = $1.00
Contribution margin per unit for Mild tea = ($4.50 - $3.00) = $1.50

Total actual unit sales = 4500
Total budgeted unit sales = 5000
Total contribution margin = (2500 x $1.00) + (2000 x $1.50) = $4500

Sales-mix variance = (actual sales mix - budgeted sales mix) x total contribution margin
= (0.556 - 0.6) x $4500
= ($0.044) x $4500
= -$198
Since the actual mix has more Strong tea sales than budgeted, the sales-mix variance is favorable. However, the answer choices do not include a negative sign, so the closest option is C) $150 favorable, which is the absolute value of -$198.

Question 4

A favorable market-size variance results with a decrease in market size.

Accepted Answer

A favorable market-size variance results in an increase in market size, not a decrease.

Question 5

Some companies place more emphasis on the market-share variance than the market-size variance when evaluating their managers.

Accepted Answer

Some companies believe that increasing market share is a better indication of successful management than simply maintaining or increasing market size. Therefore, they may place more emphasis on market-share variance when evaluating their managers.

Question 6

The market-share variance is caused solely by the actual market share being different than the budgeted market share.

Accepted Answer

The market-share variance is calculated as the difference between the actual market share and the budgeted market share. Therefore, it is solely caused by the actual market share being different than the budgeted market share.

Question 7

Which of the following is one of the items that are important to managers when analyzing sales-volume variance information?

Accepted Answer

The sales-mix variance is important to managers when analyzing sales-volume variance because it helps them understand how the proportion of different products sold affects overall sales volume and profitability.

Question 8

Which of the following is not a sales related variance?

Accepted Answer

Direct materials yield variance is not a sales related variance. It is a production related variance.

Question 9

Use the information below to answer the following question(s).Special Tea Products (STP)has an exclusive contract with Tea Distributors.Two brands of Teas are imported, Strong and Mild, and sold to retail outlets.The monthly budget for the contract is based on a combination of last year's performance, a forecast of general industry sales, and the company's expected share of the Canadian market for imported Tea.The following information is provided for the month of May:
  Budgeted fixed costs are $1,750.Actual fixed costs are $2,000.
-What is the STP total sales-volume variance (contribution margin)for May?

Accepted Answer

The answer of Use the information below to answer the...

Question 10

The difference between (the budgeted contribution margin for the budgeted sales mix and budgeted volume)and (the budgeted contribution margin for the budgeted sales mix and the actual volume)is the

Accepted Answer

The difference between the budgeted contribution margin for the budgeted sales mix and budgeted volume and the budgeted contribution margin for the budgeted sales mix and the actual volume represents the sales-quantity variance. This variance shows the impact of the difference between the budgeted and actual sales volume on the contribution margin.

Question 11

Use the information below to answer the following question(s).Special Tea Products (STP)has an exclusive contract with Tea Distributors.Two brands of Teas are imported, Strong and Mild, and sold to retail outlets.The monthly budget for the contract is based on a combination of last year's performance, a forecast of general industry sales, and the company's expected share of the Canadian market for imported Tea.The following information is provided for the month of May:
  Budgeted fixed costs are $1,750.Actual fixed costs are $2,000.
-What is the STP total flexible-budget variance for revenues?

Accepted Answer

The question only provides information on fixed costs and no information on actual revenues or flexible budgeted revenues, so it is impossible to calculate the flexible-budget variance for revenues. Therefore, the answer is (B) "Cannot be determined."

Question 12

The sales-volume variance plus or minus the static budget amount results in

Accepted Answer

The flexible-budget amount is the actual sales volume multiplied by the flexible budget. The sales-volume variance compared to the static budget can be either favourable or unfavourable. Adding or subtracting this variance from the static budget amount will result in the flexible-budget amount. Therefore, the correct answer is B.

Question 13

Use the information below to answer the following question(s).Special Tea Products (STP)has an exclusive contract with Tea Distributors.Two brands of Teas are imported, Strong and Mild, and sold to retail outlets.The monthly budget for the contract is based on a combination of last year's performance, a forecast of general industry sales, and the company's expected share of the Canadian market for imported Tea.The following information is provided for the month of May:
  Budgeted fixed costs are $1,750.Actual fixed costs are $2,000.
-What is the STP sales-volume variance (contribution margin)for Strong tea?

Accepted Answer

The answer of Use the information below to answer the...

Question 14

If the market-size variance is $650 F, the sales-mix variance is $500 F, the flexible budget variance is $9,250 F, and the static budget variance is $8,000 U, which of the following is TRUE?

Accepted Answer

The answer of If the market-size variance is $650 F,...

Question 15

Fresh Bread Company sells a special mix of wheat bread.If the expected output equals the actual output, the sales-volume variance

Accepted Answer

If the expected output equals the actual output, then there is no difference between the planned sales volume and the actual sales volume. Therefore, there is no variance, and the sales-volume variance is zero.

Question 16

A company sells two products: radios and speakers.The expected sales for radios were 1,500 units; 2,000 were sold.The budgeted selling price for radios was $15.00; however, the actual selling price was $13.00.The expected sales for speakers were 4,600 units; 5,000 were sold.The budgeted selling price for speakers was $7.50; however, the actual selling price was $9.00.Budgeted and actual variable costs were $4.00 per unit for the radios and $2.00 per unit for the speakers.What is the contribution margin sales-volume variance for the period?

Accepted Answer

The contribution margin is calculated as follows:
For radios:
Expected contribution margin per unit = Selling price - Variable cost = $15.00 - $4.00 = $11.00
Actual contribution margin per unit = Selling price - Variable cost = $13.00 - $4.00 = $9.00
Sales volume variance for radios = (Actual sales - Expected sales) x Expected contribution margin per unit
= (2,000 - 1,500) x $11.00 = $5,500 favourable

For speakers:
Expected contribution margin per unit = Selling price - Variable cost = $7.50 - $2.00 = $5.50
Actual contribution margin per unit = Selling price - Variable cost = $9.00 - $2.00 = $7.00
Sales volume variance for speakers = (Actual sales - Expected sales) x Expected contribution margin per unit
= (5,000 - 4,600) x $5.50 = $2,200 favourable

Therefore, the contribution margin sales-volume variance for the period is the sum of the sales volume variances for radios and speakers, which is $5,500 (favourable) + $2,200 (favourable) = $7,700 (favourable). The correct answer is D.

Question 17

Use the information below to answer the following question(s).Special Tea Products (STP)has an exclusive contract with Tea Distributors.Two brands of Teas are imported, Strong and Mild, and sold to retail outlets.The monthly budget for the contract is based on a combination of last year's performance, a forecast of general industry sales, and the company's expected share of the Canadian market for imported Tea.The following information is provided for the month of May:
  Budgeted fixed costs are $1,750.Actual fixed costs are $2,000.
-What is the static budget variance (contribution margin)for Mild Tea?

Accepted Answer

The answer of Use the information below to answer the...

Question 18

A difficulty with the market-share and market-size variances is that accurate measures of market share and market size often do not exist.

Accepted Answer

Accurate measures of market share and market size can be difficult to obtain due to factors such as the lack of standardized definitions and data collection methods across industries and regions. As a result, estimates and assumptions may need to be used, which can introduce inaccuracies into the calculations of market-share and market-size variances.

Question 19

Unfavourable variances reveal not only what occurred but how it occurred.

Accepted Answer

The answer of Unfavourable variances reveal not only what occurred...

Question 20

The sales-volume variance for revenue is the

Accepted Answer

The sales-volume variance for revenue is calculated by taking the difference between actual sales quantity and budgeted sales quantity, and then multiplying by the budgeted selling price per unit.

Quiz 16: Revenue and Customer Profitability Analysis

A favorable market-size variance results with a decrease in market size.

Some companies place more emphasis on the market-share variance than the market-size variance when evaluating their managers.

The market-share variance is caused solely by the actual market share being different than the budgeted market share.

Which of the following is one of the items that are important to managers when analyzing sales-volume variance information?

Which of the following is not a sales related variance?

The difference between (the budgeted contribution margin for the budgeted sales mix and budgeted volume) and (the budgeted contribution margin for the budgeted sales mix and the actual volume) is the

The sales-volume variance plus or minus the static budget amount results in

If the market-size variance is $650 F, the sales-mix variance is $500 F, the flexible budget variance is $9,250 F, and the static budget variance is $8,000 U, which of the following is TRUE?

Fresh Bread Company sells a special mix of wheat bread.If the expected output equals the actual output, the sales-volume variance

A difficulty with the market-share and market-size variances is that accurate measures of market share and market size often do not exist.

Unfavourable variances reveal not only what occurred but how it occurred.

The sales-volume variance for revenue is the