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?

Question

Quizplus · 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.

A Company Sells Two Products: Radios and Speakers