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Quill Pen Company manufactures two lines of pens: super and executive. Budgeted and actual contribution margin statements follow: Quill Pen Company Budget and actual contribution
Quill Pen Company manufactures two lines of pens: super and executive. Budgeted and actual contribution margin statements follow: Quill Pen Company Budget and actual contribution statements for the year ended 31 December (in '000s) Budget Actual Total Super 150 $900 450 $450 Executive Total Super 130 $780 390 $390 Executive Unit sales Sales revenue Variable expenses Contribution margin Fixed expenses 100 $1000 750 250 250 $1900 1200 700 130 $1 235 975 S 260 260 $2015 1365 650 S 190 140 90 $ 420 230 Manufacturing S 200 Marketing Administration Total fixed expenses Profit before taxes S 448 $ 252 quired 1. The budgeted total volume of 250 000 units was based on the company achieving a market share of 20 per cent. Actual industry volume reached 1 290 000 units. Calculate the portion of Quill's increased volume resulting from improved market share 2. Calculate the variance of actual contribution margin from budgeted contribution margin attributable to the sales price. Indicate whether the variance is favourable or unfavourable. (Hint: Add the sales price variances calculated for each product line.) Calculate the variance of actual contribution margin from budgeted contribution margin attributable to unit variable cost changes. For each product, indicate whether the variance is favourable or unfavourable 3. 4. Provide a reconciliation that explains the source of differences between actual contribution margin and budgeted contribution margin. (Hint: List variances that explain the difference.)
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