Hathaway Products, Inc., produces an innovative lighting system used in restaurants and high-end retail stores to provide

Question:

Hathaway Products, Inc., produces an innovative lighting system used in restaurants and high-end retail stores to provide a pleasing, warm atmosphere. Hathaway produces two versions of the product, called Starlight and Moonlight. Sales management at Hathaway wants to complete a sales performance analysis and has collected the following information for 2009 and 2010.

Actual Budget	2010	2009
Sales units	12,000	10,000
Sales mix for each product
Starlight	20%	25%
Moonlight	80%	75%
Price
Starlight	$35.00	$35.00
Moonlight	$85.00	$90.00
Variable cost per unit
Starlight	$22.00	$22.00
Moonlight	$48.00	$48.00
Fixed cost	$150,000	$150,000

Required
1. Calculate a flexible budget contribution income statement for 2010, showing the 2010 results, the 2009 results, and the flexible budget. Use Exhibit 16.15 as a guide.
2. Calculate the volume variances for each product based both on sales dollars and contribution margin.
3. Determine the sales volume variance, the sales mix variance, and the sales quantity variance for each product, based on contributionmargin.

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...