The vice president of marketing was not satisfied with the results of last quarter's sales. She met with the marketing managers and the three regional marketing representatives to discuss the problem and told them, "From now on we'll fix responsibility for sales performance. The regional representatives are responsible for all sales quantity variances. The marketing manager is responsible for sales mix variances, and I'll take responsibility for contribution margin variances. Here are the new prices. Get those products sold." The vice president had increased most prices to ensure favorable contribution margin variances. By the end of the next quarter, all three regional managers turned in glowing sales quantity variance reports. However, the sales mix report showed large unfavorable variances, and although most contribution margin variances were favorable, profit for the quarter was down sharply.

Discuss the merits of the vice-president's new policy. What may have caused the re- ported variances?