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Contribution Margin Variance Analysis in Flexible Budgets, Schemes and Mind Maps of Cost Management

Alder Grange High School, RawtenstallCost Management

An analysis of contribution-margin budget variance, contribution-margin variance, contribution-margin sales-volume variance, and contribution-margin sales-mix variance using examples for products rm-67 and jr-63. The analysis is based on the data presented in the document and aims to help readers understand the concepts of flexible budgets and variance analysis.

What you will learn

  • What is contribution-margin budget variance and how is it calculated?
  • What is contribution-margin variance and how is it calculated?
  • What is contribution-margin sales-volume variance and how is it calculated?

Typology: Schemes and Mind Maps

2021/2022

Uploaded on 09/27/2022

mdbovary
mdbovary 🇬🇧

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Chapter 17 - Flexible Budgets, Overhead Cost Management, and Activity-Based Budgeting
17-49
17.59 (45 min) Sales variance analysis
(1) Contribution-margin budget variance:
product each for
variancesmargin-oncontributi of Sum
iancebudget var
margin-onContributi =
==
=
−
−−
−=
==
=
iproduct for
margin oncontributi
totalBudgeted
iproduct for
margin oncontributi
totalActual
iproduct for
iancebudget var
margin-onContributi
Applying the formula yields the following results.
RM-67 contribution-margin budget variance = $5,880,000
−
−−
−
$6,000,000 = $ 120,000 U
JR-63 contribution-margin budget variance = $4,760,000
−
−−
−
$3,600,000 = 1,160,000 F
Contribution-margin budget variance ............................................$1,040,000 F
(2) Contribution-margin variance:
product each for
variancesmargin-oncontributi of Sum
variance
margin-onContributi
=
==
=
iproduct for
volumesales
Actual
iproduct for
margin oncontributi
unit Budgeted
iproduct for
margin oncontributi
unit Actual
iproduct for
variance
margin-onContributi ×
××
×
−
−−
−=
==
=
In this case, the formula yields the following results.
RM-67 contribution-margin variance = ($1,050
−
−−
−
$1,000)
×
××
×
5,600 = $280,000 F
JR-63 contribution-margin variance = ($1,700
−
−−
−
$1,800)
×
××
×
2,800 = 280,000 U
Contribution-margin variance........................................... $ 0
pf3

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17.59 (45 min) Sales variance analysis (1) Contribution-margin budget variance: Contributibudget var on - iancemargin ==== Sumofcontributifor eachon product-marginvariances

==== ^ −−−−

contributifor productonmargini Budgetedtotal contributifor productonmargini Actualtotal budget varfor productiancei Contribution-margin

Applying the formula yields the following results. RM-67 contribution-margin budget variance = $5,880,000−−−−$6,000,000 = $ 120,000 U JR-63 contribution-margin budget variance = $4,760,000−−−−$3,600,000 = 1,160,000 F Contribution-margin budget variance ............................................$1,040,000 F (2) Contribution-margin variance: Contributivarianceon - margin ==== Sumofcontributifor eachonproduct-marginvariances

salesfor productvolume i Actual contributifor producton margini Budgetedunit contributi for productonmargini Actualunit forvarianceproducti

Contribution - margin ×××× 

  ==== ^ −−−−

In this case, the formula yields the following results. RM-67 contribution-margin variance = ($1,050−−−−$1,000) ×××× 5,600 = $280,000 F JR-63 contribution-margin variance = ($1,700−−−−$1,800) ×××× 2,800 = 280,000 U Contribution-margin variance ........................................... $ 0

17.59 (continued) (3) Contribution-margin sales-volume variance:

salesvariance-volume Sumofcontributionfor-margin each productsales-volumevariances Contribution- margin ====

contributifor producton margin i Budgeted salesfor product volumei Budgetedunit salesfor product volumei Actualunit forvarianceproducti

Contributisales - onvolume-margin  ×××× 

  ==== ^ −−−−

Using the formula, the contribution-margin sales-volume variance is computed as follows: RM-67 contribution-margin sales-volume variance = (5,600−−−−6,000) (^) ×××× $1,000 = $ 400,000 U JR-63 contribution-margin sales-volume variance = (2,800−−−−2,000) ×××× $1,800 = 1,440,000 F Contribution-margin sales-volume variance ........................................... $1,040,000 F (4) Contribution-margin sales-mix variance:

salesvariance-mix Sumofvariancescontributi foroneach-marginproductsales-mix Contribution- margin ====

forsalesall productsvolume

totalActualunit forproportionproducti

Budgetedsales forproportionproducti

Actualsales marginproductfori contributiBudgetedon forvarianceproducti

Contributisaleson - mix-margin  ×××× 

  ==== ××××^ −−−−

We then have the following calculation: RM-67 contribution-margin sales-mix variance = $1,000 ×××× [(2/3)−−−−.750)] ×××× 8,400 = $ 700,000 U JR-63 contribution-margin sales-mix variance = $1,800Contribution-margin sales-mix variance....................................................... ×××× [(1/3)−−−−.250)] ×××× 8,400 = (^) $1,260,000 560,000 F F