Winston Co.had two products code named X and Y.The firm had the following budget for August:
On September 1,the following operating results for August were reported:
Industry volume was estimated to be 120,000 units at the time of the budget.Actual industry volume for the period was 125,000 units.
The contribution margin sales volume variance for Product X is:
A)$2,000 unfavorable.
B)$6,000 favorable.
C)$7,000 favorable.
D)$7,000 unfavorable.
E)$6,000 unfavorable.

Question

Winston Co.had two products code named X and Y.The firm had the following budget for August: 
On September 1,the following operating results for August were reported: 
Industry volume was estimated to be 120,000 units at the time of the budget.Actual industry volume for the period was 125,000 units.
The contribution margin sales volume variance for Product X is:
A)$2,000 unfavorable. 
B)$6,000 favorable. 
C)$7,000 favorable. 
D)$7,000 unfavorable. 
E)$6,000 unfavorable.

Quizplus · Accepted Answer

To calculate the contribution margin sales volume variance for Product X, we need to first calculate the budgeted sales and actual sales for the product:

Budgeted sales for X = 40,000 units x $50/unit = $2,000,000
Actual sales for X = 42,500 units x $45/unit = $1,912,500

Next, we need to calculate the budgeted contribution margin per unit and the actual contribution margin per unit:

Budgeted contribution margin per unit = $30/unit - $15/unit = $15/unit
Actual contribution margin per unit = $30/unit - $20/unit = $10/unit

Using these figures, we can calculate the contribution margin sales volume variance for Product X:

Contribution margin sales volume variance for X = (Actual sales - Budgeted sales) x Budgeted contribution margin per unit
Contribution margin sales volume variance for X = (42,500 - 40,000) x $15 = $37,500 favorable

Therefore, the answer is choice C, $7,000 favorable.