Please do not use excel for this - treat it as a short answer question.
Please illustrate how to calculate the product mix variance and write out all the steps. The correct answer = 0.005 (in $mil) as shown in the last page.
In the last twenty years the company has made significant investments in their manufacturing technology including a sugar refinery, tetra pak plant and their own plastic bottle plant. They are now relatively significant players in the soft- drink and fruit juice range holding a market share of about 20%. Their fruit juice product range comprises fresh pineapple, orange, mango, apple, blackcurrant, coconut, pear, peach and passionfruit juice and fruit blends (such as tropical punch, orange/mango etc). This industry has been growing moderately for the past five years but has struggled with high prices for juice, a result of poor seasons and wild weather. The key industry statistics are included in the following table. Key Juice Drink Manufacturing Industry Statistics Industry Size $750 million revenue 500 million litres in 2009 522.5 million litres in 2010 Market Size Growth (2009 to 2010) 4.5% per annum Key Juice Drink Industry Participants - Market Share San Miguel 55% Golden Fruits 20% Coca-Cola Amatil Private Labels (home brands) 1096 P&N Beverages 7-996 Cadbury Schweppes 1-296 Others Approx 196 In 2010, Golden Fruits recorded substantial losses and chairperson Erin Popper stated the company needed to cut costs by more than $25 million a year to overcome inefficiencies. In order to support an analysis of the efficiency and competitive effectiveness of the juice segment during 2010, the following information has been compiled: Volume Revenue Variable COGS Contribution margin Fixed product line costs Allocated corporate costs (4% of revenue) Segment profit/loss Master Budget 2010 100 million litres $150 mill $120 mill $30 mill $20 mill $6 mill $4 mill Actual Results 2010 103 million litres $170 mill $145 mill $25 mill $21 mill $6.8 mill $12.8) mill The 2010 budget was prepared on the basis of zero growth from 2009 and an expected market share of 20% Tasks 1. Calculate the market size and market share variances Market Size = change in market size budgeted market share planned avg CM = (522.5m - 500m) * 20% 3 = 22.5m. 2.3 = $1 350 000 F Market share = actual market size change in market share planned avg CM = 522.5 * (10/500 - 103/522.5) 3 = 522.5 0.0029.3 = $454 575 U volume master budget volume variance adjusted budget price/unit cost variance actual volume million litres 100.000 103.000 103.000 revenue COGS contribution margin operating expense segment profit / (loss) $'000,000 $'000,000 $'000,000 $'000,000 $'000,000 150.000 (120.000) 30.000 (26.000) 4.000 154.500 (123.600) 30.900 0.900 15.500 (21.400) (5.900) (1.800) 170.000 (145.000) 25.000 (27.800) (2.800) $'000,000 $'000,000 $'000,000 $'000,000 4.000 planned segment profit maket size variance market share variance product mix variance volume variance 1.350 (0.455) 0.005 0.900 15.500 (21.400) (5.900) price variance COGS variance unit price/unit cost variance contribution margin variance operating expense variance segment profit variance actual segment loss (5.000) (1.800) (6.800) (2.800)
