Contribution Margin Variances: Markley Division of Rosette Industries manufactures and sells patio chairs. The chairs are manufactured in two versions-a metal model and a plastic model of a lower quality. The company uses its own marketing force to sell the chairs. The chairs are manufactured on two different assembly lines located in adjoining buildings. Division management and the marketing department occupy the third building on the property. Division management includes a division controller respon- sible for divisional financial activities and preparation of variance reports. The controller structures these reports such that the marketing activities are distinguished from cost factors so that each can be analyzed separately. The operating results and the related master budget for the first three months of the fiscal year follow. The budget for the current year assumes Markley Division will maintain its present market share of the estimated total patio chair market (plastic and metal combined). A status report was sent to corporate management toward the end of the second month indicating that divisional operating profit for the first quarter would probably be about 45 percent below budget; this estimate was just about on target. The division's operating income was below budget even though industry volume for patio chairs increased by 10 percent more than was expected when the budget was developed.

During the quarter, the company produced 55,000 plastic chairs and 22.500 metal chairs. The costs incurred by each manufacturing unit are presented below.

Standard variable manufacturing costs per unit and budgeted monthly fixed manufacturing costs for the current year are presented below.

Variable marketing costs are budgeted to be 6 percent of sales-dollars.

Required: Compute Markley Division's marketing price, mix, and quantity variances.

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Favorable (Unfavorable) Relative to Actual Budget the Budget Sales in units: Plastic model 60,000 50,000 10,000 Metal model 20,000 25,000 (5,000) Sales revenue: Plastic model Metal model $630,000 $500,000 $130,000 300,000 375,000 (75,000) 930,000 875,000 55,000 Total sales Less variable costs: Manufacturing (at standard): Plastic model 480,000 400,000 (80,000) Metal model 200,000 250,000 50,000 Marketing: Commissions 46,500 43,750 (2,750) Bad debt allowance 9,300 8,750 (550) Total variable costs (except variable manufacturing variances) 735,800 702,500 (33,300) Contribution margin (except variable manufacturing variances) 194,200 172,500 21,700 Less other costs: Variable manufacturing cost variances from standards 49,600 (49,600) Fixed manufacturing costs 49,200 48,000 (1,200) Fixed marketing administrative costs 38,500 36,000 (2,500) Corporation offices allocation 18,500 17,500 (1,000) Total other costs 155,800 101,500 (54,300) Divisional operating profit $ 38,400 $ 71,000 $(32,600)