Question 1

When the market share variance is unfavorable, it means that the budgeted share of the market is:

Accepted Answer

Unfavorable variance means the budgeted share is less than the actual share, so the correct choice is C - that the budgeted share is more than the actual market share.

Question 2

The sales price variance is created by a difference between:

Accepted Answer

The sales price variance is created by the difference between the actual and expected sales price. It measures the impact of a change in the selling price on the total revenue earned by the company. The difference between the actual and expected sales volume creates the sales volume variance, not the sales price variance. Actual and standard contribution margin create the contribution margin variance, and expected and standard net income create the net income variance.

Question 3

The market size variance is the difference between actual and budgeted industry sales in units, multiplied by the budgeted market share percentage, times the:

Accepted Answer

The answer of The market size variance is the difference...

Question 4

The contribution margin variance is the difference between the actual contribution margin and the:

Accepted Answer

The contribution margin variance measures the difference between the actual and budgeted contribution margin, which represents the amount of revenue that is available to cover fixed costs and to generate profits. The actual unit price and actual variable expenses are not relevant to this variance as they only affect the actual revenue and costs, respectively. The budgeted variable expenses are already included in the budgeted contribution margin, so they cannot be used to calculate the variance.

Question 5

The majority of the product cost is "locked in" during which of the following life-cycle stages?

Accepted Answer

The majority of the product cost is typically "locked in" during the development stage, when significant investments are made in research and development, design, and engineering. Once the product reaches the introduction and growth stages, the cost structure is relatively fixed, and incremental changes have less impact on the overall cost. By the time the decline stage is reached, the cost structure is already established, and there is typically less opportunity for further cost optimization.

Question 6

The sum of the change in units for each product multiplied by the difference between the budgeted contribution margin and the budgeted average unit contribution margin is called the:

Accepted Answer

The sum of the change in units for each product multiplied by the difference between the budgeted contribution margin and the budgeted average unit contribution margin is called the sales mix variance. This variance measures the impact of actual sales mix on profits, compared to the budgeted sales mix.

Question 7

In order for an effect of changing sales mix on profit to exist, a company must produce:

Accepted Answer

In order to have a sales mix, a company must have more than one product. Therefore, the best choice is B, more than one product. A, one product, is incorrect. C, more than one location, is not necessarily needed for a sales mix to have an effect on profit. D, even number of products, is not relevant to the issue of changing sales mix and profit.

Question 8

The budgeted average unit contribution margin is the budgeted total contribution margin divided by the:

Accepted Answer

The budgeted average unit contribution margin is calculated by dividing the budgeted total contribution margin by the budgeted total units. This gives the amount of contribution margin earned per unit sold, on average.

Question 9

The budgeted contribution margin of two products is $1,000 the actual contribution margin is $500 and the total variable expenses are $750. The contribution margin variance is:

Accepted Answer

The formula for contribution margin variance is: 
Budgeted CM - Actual CM
In this case, the budgeted CM is $1,000 and the actual CM is $500, so:
$1,000 - $500 = $500 (U)
Therefore, the correct answer is B) $500(U).

Question 10

According to Hansen and Mowen, which of the following product life cycle stages comes first?

Accepted Answer

The answer of According to Hansen and Mowen, which of...

Question 11

Franklin Company's expected sales were 2,000 units at $100 per unit. During 2014, it had actual sales of 1,800 units at $110 per unit. Budgeted variable costs were $60 per unit. What is Franklin's total sales variance?

Accepted Answer

The answer of Franklin Company's expected sales were 2,000 units...

Question 12

Which of the following product life cycle stages is characterized by rapid increases in sales and production?

Accepted Answer

The growth stage is characterized by rapid increases in sales and production as the product gains acceptance in the market. This is typically the stage where companies experience the highest levels of profitability and market share growth.

Question 13

The market share and market size variances allow firms to compare their performance with the:

Accepted Answer

Market share and market size variances allow firms to compare their performance with the market as a whole, which is important for determining their position in the industry and identifying potential areas for improvement. Option B is not the best choice because it only compares performance with the previous year, without taking into account the broader market conditions. Option C is not the best choice because it refers to future projections, which may not have any basis in reality. Option D is not the best choice because it only focuses on internal factors, without considering external market forces.

Question 14

The market share variance is calculated by

Accepted Answer

The market share variance measures the impact of the difference between the actual market share and the budgeted market share on the overall profitability. Option B calculates this by using the difference between the actual market share percentage and the budgeted market share percentage, multiplied by the actual industry sales in units, and then multiplied by the budgeted average unit contribution margin. This formula takes into account both the market share and sales volume variances. Options A, C, and D are not focused on measuring the market share variance specifically.

Question 15

The market size variance is favorable when the budgeted industry sales in units is:

Accepted Answer

Market size variance compares the actual sales with the budgeted sales for the entire industry. If the budgeted industry sales in units is less than the actual units sold, it means the market size variance is favorable because the company has captured a larger portion of the market than anticipated. Therefore, option B is correct.

Question 16

The contribution margin variance is favorable if the budgeted contribution margin is less than the:

Accepted Answer

The contribution margin variance is favorable when the actual contribution margin exceeds the budgeted contribution margin, indicating that the company has generated more profit per unit than anticipated.

Question 17

Which of the following product life cycle stages has revenues for the entire industry decreasing?

Accepted Answer

During the decline stage of the product life cycle, revenues for the entire industry start to decrease as the product becomes outdated or replaced by newer technologies or products.

Question 18

The sales mix variance tells managers what impact a difference between actual and expected percentages of products sold has on:

Accepted Answer

The sales mix variance measures the impact of the difference between the actual and expected mix of products sold on the contribution margin. It highlights how changes in the proportions of various products sold affect profitability, assuming total sales volume remains constant.

Question 19

The budgeted quantity sold of a product is 200 units. The actual quantity sold is 100 units. The budgeted average unit contribution margin is $3.00. What is the contribution margin volume variance?

Accepted Answer

The answer of The budgeted quantity sold of a product...

Question 20

The contribution margin volume variance is the difference between the actual and budgeted quantities sold multiplied by the:

Accepted Answer

The contribution margin volume variance is calculated by multiplying the difference between the actual and budgeted quantities sold by the budgeted average unit contribution margin. Therefore, the correct answer is D, which represents the budgeted average unit contribution margin.

Quiz 18: Pricing and Profitability Analysis