Question 3 (20 Marks) Pop-Queen Ltd manufactures and sells two soft drinks: Kola and Limor. Details of the 2018 actual and master budget operating incomes are shown below. In the following table a unit is a carton of Kola or Limor, and all financial results and units in this table are in thousands. Actual Master Budget Kola Limor Total Kola Total Limor 360 Units (cartons) 261 319 580 240 600 Sales $2,610 1.827 783 500 $283 $5,742 3,828 1,914 $8,352 5.655 2,697 Variable expenses Contribution margin Fixed expenses Operating income $2,880 1.920 960 500 $460 $5,400 3,600 1,800 1,000 $800 $8,280 5,520 2,760 1,500 $1,260 1,000 1,500 $914 $1,197 When establishing the budget the company's CFO expected total industry sales to be 2,520,000 cartons for the year. At the end of the year, the CFO reported the total sales for the industry were, in fact, 200,000 cartons lower than expected. Required: Calculate each of the following for 2018: (Use the contribution margin to calculate all required variances and indicate whether a variance is favourable or unfavourable) 1. Prepare an analysis showing the total static budget variance, the total flexible budget variance and the total sales volume variance at the contribution margin level for the company (5 Marks) 2. Calculate the sales quantity and sales mix variances for each product and for the company (5 Marks) 3. Calculate the market share variance for the company. (2 Marks) 4. Calculate the market size variance for the company (2 Marks) 5. Based on your variance analysis above, prepare a brief report that explains the company's performance for 2018. (4 Marks) 6. Explain why some customers are less profitable than others. Give one reason from customer-revenue analysis and one reason from customer-cost analysis. (2 Marks) Question 3 (20 Marks) Pop-Queen Ltd manufactures and sells two soft drinks: Kola and Limor. Details of the 2018 actual and master budget operating incomes are shown below. In the following table a unit is a carton of Kola or Limor, and all financial results and units in this table are in thousands. Actual Master Budget Kola Limor Total Kola Total Limor 360 Units (cartons) 261 319 580 240 600 Sales $2,610 1.827 783 500 $283 $5,742 3,828 1,914 $8,352 5.655 2,697 Variable expenses Contribution margin Fixed expenses Operating income $2,880 1.920 960 500 $460 $5,400 3,600 1,800 1,000 $800 $8,280 5,520 2,760 1,500 $1,260 1,000 1,500 $914 $1,197 When establishing the budget the company's CFO expected total industry sales to be 2,520,000 cartons for the year. At the end of the year, the CFO reported the total sales for the industry were, in fact, 200,000 cartons lower than expected. Required: Calculate each of the following for 2018: (Use the contribution margin to calculate all required variances and indicate whether a variance is favourable or unfavourable) 1. Prepare an analysis showing the total static budget variance, the total flexible budget variance and the total sales volume variance at the contribution margin level for the company (5 Marks) 2. Calculate the sales quantity and sales mix variances for each product and for the company (5 Marks) 3. Calculate the market share variance for the company. (2 Marks) 4. Calculate the market size variance for the company (2 Marks) 5. Based on your variance analysis above, prepare a brief report that explains the company's performance for 2018. (4 Marks) 6. Explain why some customers are less profitable than others. Give one reason from customer-revenue analysis and one reason from customer-cost analysis. (2 Marks)