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Mountain Spring manufactures and sells varieties of sports drink (berry, lemon and orange) in bulk to upmarket. Budgeted and actual results for 2019 are as

Mountain Spring manufactures and sells varieties of sports drink (berry, lemon and orange) in bulk to upmarket. Budgeted and actual results for 2019 are as follows:

Mountain Spring

Income Statement

Year Ended 30 June 2019

budget

actual

sales revenue

$

18,680,000

19,079,500

variable costs

$

(11,400,000)

(11,794,000)

contribution margin

$

7,280,000

7,285,500

non-variable costs

$

(5,580,000)

(5,680,000)

net operating profit

$

1,700,000

1,605,500

Product Breakdown

Berry

sales volume

Boxes

500,000

400,000

selling price

$ per box

7.00

6.90

variable costs

$ per box

(4.50)

(4.40)

contribution margin

$ per box

2.50

2.50

Lemon

sales volume

Boxes

900,000

1,100,000

selling price

$ per box

7.00

6.90

variable costs

$ per box

(4.00)

(4.30)

contribution margin

$ per box

3.00

2.60

Orange

sales volume

Boxes

1,110,000

1,105,000

selling price

$ per box

8.00

7.90

variable costs

$ per box

(5.00)

(4.80)

contribution margin

$ per box

3.00

3.10

All Products Combined

sales volume

Boxes

2,510,000

2,605,000

market share

11.409%

13.025%

selling price

$ per box

7.44

7.32

variable costs

$ per box

(4.54)

(4.53)

contribution margin

$ per box

2.90

2.80

The companys director board is not happy with the net profit generate this year, as the actual net profit is less than the budgeted net profit. You are the consultant of the company and are require providing a report of variance analysis based on the results you have calculated in Q.1 and Q2. In your response, you should:

  1. What recommendations do you have for future improvement?

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