MISSISSIPI CORPORATION

Mississippi Corporation produces three models of Widget: Alpha, Beta and Gamma. Analysis has revealed that the total contribution margin came in lower than budgeted. As controller, they are looking to YOU for answers as to why the actual results are different than those on the budget. The following budgeted and actual information is available:

Required:

Note: Where appropriate, calculate all variances below in terms of contribution margin!

1. Compute the actual and budgeted contribution margins in dollars for each product and in total.

2. Calculate the actual and budgeted sales mixes for the three products for the period.

3. Compute the static budget variance for the period (in terms of contribution margin).

4. Further analyze the variance computed in #3 by breaking it into the sales-price variance (flexible budget variance) and sales volume variance (in terms of contribution margin).

5. Break down the sales volume variance in #4 above by computing the sales-mix and sales-quantity variances (in terms of contribution margin).

The budget above was prepared assuming a 25% market share based on total sales (all three combined). The total Widget market was estimated by research studies to be 388,000 units worldwide. Actual industry unit sales were 400,000 units.

6. Further analyze the sales quantity variance from #5 above by computing the market-share and market-size variances for the period (in terms of contribution margin). Do this in total. Not necessary to break up into individual products (for now).

Budgeted data Selling Variable Cost Contribution Sales Volume Price per Unit Margin per Unit in Units S374 > 185 $ 189 176 78 13,580 units 35,890 47,530 97,000 units 272 144 Beta 96 Gamma Actual data Selling Variable Cost Contribution Sales Volume Price per Unit Margin per Unit in Units 175 $ 190 194 35 $365 $ Alpha Beta Gamma 10,120 units 32,200 49,680 92,000 units 288 110 94 75