Canadian Food Co. (CFC) is a large organization which has a number of divisions in the bakery and food fields. Their jam and marmalade division produce 5 types of sandwich spreads which it sells in jars. Their plan is to be the low cost provider of spreads in a competitive market. The price of the inputs are set by the commodity market and generally beyond the control of management. You are the management accountant assigned to this division. CFCs year end is September 2020. Production equals sales so there are no inventories.

A) The sales and cost figures for the month of August 2020 are as follows. Variable and fixed costs are all manufacturing costs. Selling, administrative, marketing and other costs are ignored.

CFC uses the variable costing approach for its sales and cost analysis. As part of the management report you are required to calculate the following figures:

• Budget and actual break-even revenue for each type of spread

• Operating income in total and for each type of spread

B) After considering the information identified as part of the sales analysis you note the lowest contribution margin is for marmalade. You decide to analyze the marmalade variable costs for August. The variable costs for marmalade are primarily determined by the direct cost of oranges. Other components such as sugar, filler and binding chemicals vary little. CFC purchases three types of oranges from California, Florida and Mexico. Each type of orange has its own flavour. The oranges from California are the most inexpensive but have the least flavour while the oranges from Mexico cost the most but have the most flavour. CFC calculates costs on a flexible budget basis. 6 kilograms of oranges are budgeted to result in one jar of product.

As part of the management report you are required to calculate the following figures on a flexible budget basis for August:

• Direct materials price and efficiency variances

• Direct materials mix and yield variances

c) Further review of the data indicates there has been a change in the market for strawberry and raspberry jam. The actual sales figures are very different then budgeted. So you decide to investigate the sales volume contribution margin variances implications.

The expected sales volume for the entire strawberry and raspberry market was 75, 000 with 24,750 for raspberry units while the actual sales volume for the market was 76,000 units with 30,400 for strawberry.

• Calculate the sales-quantity CM variance

• Calculate the sales-mix CM variance

• Calculate the sales-volume CM variance

D) You further decide to investigate the sales volume aspects of marmalade. You have extracted data from the sales management system which suggest sales volume is dependent upon the weather and the price of the product. The data suggests warmer weather means lower sales volume but lower selling prices indicates higher sales volume. You have an Excel workbook of raw data from the sales management system which you plan to use as a basis for your analysis.

Budget Marmalade Apple Strawberry Raspberry Mixed Selling Price Variable Cost Fixed Cost Sales Volume $ 4.60 $ 2.60 $50,000 45,000 5.00 2.70 19,000 25,000 5.50 2.90 15,000 10,000 6.00 3.40 6,900 5,000 6.60 3.90 22,000 15,000 100,000 Actual Marmalade Apple Strawberry Raspberry Mixed Selling Price Variable Cost Fixed Cost Sales Volume $ 4.60 $ 2.71 $50,000 57,600 5.20 2.90 20,000 18,000 5.70 3.00 15,000 9,600 6.10 3.50 17,000 13,200 7.00 4.00 21,000 21,600 120,000 Budgeted costs and inputs for a month to produce 45,000 jars: 135,000 kilograms from California @ $0.40 90,000 kilograms from Florida @ $0.45 45,000 kilograms from Mexico @ $0.50 $ 54,000 40,500 22,500 $ 117,000 Actual costs and inputs for August to produce 57,600 jars: 160,000 kilograms from California @ $ 0.45 115,200 kilograms from Florida @ $0.45 58,800 kilograms from Mexico @ $ 0.55 $ 72,000 51,840 32,340 $ 156,180