Question 3

Acme Beds Inc. produces two models of beds, the Regular and the Majestic. Budgeted and actual data for the year for each model are as follows:

Budget Actual

Regular Majestic Regular Majestic

Selling price per unit $ 300 $ 800 $ 325 $ 700

Variable cost per unit $ 220 $ 590 $ 238 $ 583

Sales volume in units 4,500 5,500 7,200 4,800

Master Budget Actual

Sales revenue $ 5,750,000 $ 5,700,000

Variable costs 4,235,000 5,512,000

Contribution margin $ 1,515,000 $ 1,188,000

Fixed costs 882,500 919,500

Operating income $ 632,500 $ 268,500

Market data for the year:

Expected total demand 500,000 beds

Actual total demand 666,667 beds

Required

Calculate the sales price variance for each model and in total.

Calculate the sales volume variance for each model and in total.

Calculate the sales mix variance for each model and in total.

Calculate the sales quantity variance in total.

Calculate the market share variance for Acme Beds.

Calculate the market size variance for Acme beds.

What do you consider the most important reason why actual operating income was less than budgeted operating income for the year? Explain your reasoning.