Gourmet Aroma Coffee House has an exclusive contract with Columbia exporters. Two brands of gourmet coffee are imported, Morning Thunder (MT) and Evening Tender (ET). The following data are provided for the current fiscal year:The total market was estimated to be 80,000 pounds at the time of budget. The actual total market for the year is 75,000 pounds.
What is MT's sales mix variance?
A) $800 unfavorable.
B) $9,600 unfavorable.
C) $10,800 unfavorable.
D) $12,480 unfavorable.
E) $14,040 unfavorable.

Question

Gourmet Aroma Coffee House has an exclusive contract with Columbia exporters. Two brands of gourmet coffee are imported, Morning Thunder (MT) and Evening Tender (ET). The following data are provided for the current fiscal year:The total market was estimated to be 80,000 pounds at the time of budget. The actual total market for the year is 75,000 pounds.
What is MT's sales mix variance?
A) $800 unfavorable. 
B) $9,600 unfavorable. 
C) $10,800 unfavorable. 
D) $12,480 unfavorable. 
E) $14,040 unfavorable.

Quizplus · Accepted Answer

To calculate the sales mix variance, we need to determine the proportion of Morning Thunder and Evening Tender in the actual sales mix and compare it to the budgeted sales mix.

Budgeted sales mix: 60% Morning Thunder, 40% Evening Tender
Actual sales mix: 50% Morning Thunder, 50% Evening Tender

To calculate the sales mix variance, we use the formula: (actual sales mix - budgeted sales mix) × actual total market × budgeted contribution margin per pound.

For Morning Thunder: 
(0.50 - 0.60) × 75,000 × $6 = $27,000 unfavorable

For Evening Tender: 
(0.50 - 0.40) × 75,000 × $4 = $10,800 favorable

The total sales mix variance is the sum of these two results: 
$27,000 unfavorable + $10,800 favorable = $16,200 unfavorable

Therefore, MT's sales mix variance is $10,800 unfavorable.

Gourmet Aroma Coffee House Has an Exclusive Contract with Columbia