Problem 17-43 Sales Mix and Quantity Variances (LO 17-3)

Peninsula Candy Company makes three types of candy bars: Chewy, Chunky, and Choco-Lite (Lite). Sales volume for the annual budget is determined by estimating the total market volume for candy bars and then applying the company's prior year market share, adjusted for planned changes due to company programs for the coming year. Volume is apportioned among the three bars based on the prior year's product mix, again adjusted for planned changes for the coming year.

The following are the company budget and the results of operations for July.

Budget	Chewy						Chunky						Choco-Lite						Total
Sales-units (in thousands)	2,000 bars						2,000 bars						4,000 bars						8,000 bars
Sales-dollars (in thousands)		$	180					$	400					$	800					$	1,380
Variable costs			130						340						660						1,130
Contribution margin		$	50					$	60					$	140					$	250
Manufacturing fixed cost			45						32						58						135
Product margin		$	5					$	28					$	82					$	115
Marketing and administrative costs (all fixed)																					59
Operating profit																				$	56
Actual
Sales-units (in thousands)	1,400 bars						2,000 bars						4,200 bars						7,600 bars
Sales-dollars (in thousands)		$	98					$	400					$	800					$	1,298
Variable costs			62						342						653						1,057
Contribution margin		$	36					$	58					$	147					$	241
Manufacturing fixed cost			35						39						60						134
Product margin		$	1					$	19					$	87					$	107
Marketing and administrative costs (all fixed)																					37
Operating profit																				$	70

Industry volume was estimated at 96.0 million bars for budgeting purposes. Actual industry volume for July was 92.0 million bars.

Required:

Break down the total activity variance into sales mix and quantity parts. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

Sales mix variance

Quantity variance