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Contribution Margin Variance

Ioannis Inc., produces and sells two types of countertop ovensthe toaster oven and the convection oven. Budgeted and actual data for the two models are shown below.

Budgeted Amounts:

		Toaster Oven		Convection Oven		Total
Sales:
($98 25,000)		$2,450,000
($147 16,000)				$2,352,000		$4,802,000
Variable expenses		450,000		720,000		1,170,000
Contribution margin		$2,000,000		$1,632,000		$3,632,000

Actual Amounts:

		Toaster Oven		Convection Oven		Total
Sales:
($84 23,500)		$1,974,000
($163 13,500)				$2,200,500		$4,174,500
Variable expenses		504,400		739,000		1,243,400
Contribution margin		$1,469,600		$1,461,500		$2,931,100

Required:

1. Calculate the contribution margin variance.

$

Unfavorable

2. What if actual units sold of the convection oven decreased? How would that affect the contribution margin variance?

It would become more unfavorable or less favorable.

3. What if actual units sold of the convection oven increased? How would that affect the contribution margin variance?

It would become less unfavorable or more favorable.

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1. Contribution margin variance = Actual contribution margin - Expected contribution margin

2. If everything else remains the same and you have more units, how will that impact total contribution margin?

If everything else remains the same and you have fewer units, how will that impact total contribution margin?

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