Metropolitan Motors is an auto retailer. Salespeople have the authority to negotiate with customers for price, but are given target profits. The firm classifies the cars it sells into one of three broad groups: economy, family, or luxury. Target sales and average expected contribution margins per unit for March were estimated as follows:

During March the auto manufacturer ran a special promotion to reduce an overstock of economy cars. The manufacturer offered to pay directly to the salespeople a bonus of $75 for each economy car sold. Actual sales and total contribution margin earned by Metropolitan Motors for March turned out to be as follows.

A. Calculate the contribution margin budget variance.
B. Calculate the contribution margin variance and contribution margin sales volume variance.
C. Calculate the contribution margin sales mix variance and the contribution margin sales quantity variance.
D. Should the management of Metropolitan Motors be pleased or upset with the manufacturer for running the special promotion?Why?

  • CreatedJanuary 26, 2015
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