Big Sky Airlines plans its budget and subsequently evaluates sales performance based on passenger —gaieg_\Variance Analysis miles. A passenger mile is one paying passenger flying one mile. For this month, the company estimated — (Appendix C)

that its contribution margin would amount to 20 cents per passenger mile and that 40 million passenger ¢_@ | 1)

miles would be flown.

As a result of improvement in the economy, 43 million passenger miles were flown this month. The price per passenger mile averaged 40 cents. The budgeted variable cost per mile was 18 cents. Management’s subsequent analysis indicated that the industry flew 107 million passenger miles this month, which was 7 percent more passenger miles than expected. The actual variable cost per passenger mile was 18 cents.

Required Taking a contribution-margin perspective, do as complete a sales variance analysis as possible. (Hint:

Use the formulas given in Appendix C, but substitute the contribution margin for the sales price.)