Houston Infonautics' senior vice president of marketing prepared his budget at the beginning of the third quarter assuming a 25% market share based on total sales. Foolinstead Research estimated that the total handheld-organizer market would reach sales of 444.000 units worldwide in the third quarter. However, actual sales in the third quarter were 500:000 units.

1. Calculate the market-share and market-size variances for Houston Infonautics in the third quarter of 2014 (calculate all variances in terms of contribution margins).

2. Explain what happened based on the market-share and market-size variances.

3. Calculate the actual market size, in units, that would have led to no market-size variance (again using budgeted contribution margin per unit). Use this market-size figure to calculate the actual market share that would have led to a zero market-share variance.

Variance analysis, sales-mix and sales quantity variances. Houston Infonautics, Inc., prod handheld Windows CE ^TM -compatible organizers. Houston Infonautics markets three different hanc models: PaImPro is a souped-up version for the executive on the go, PalmCE is a consumer-oriented ver and PalmKid is a stripped-down version for the young adult market. You are Houston Infonautics' st vice president of marketing. The CEO has discovered that the total contribution margin came in lower budgeted, and it is your responsibility to explain to him why actual results are different from the Budgeted and actual operating data for the company's third quarter of 2014 are as follows:

Budgeted Operating Data, Third Quarter 2014

Actual Operating Data, Third Quarter 2014

1. Compute the actual and budgeted contribution margins in dollars for each product and in total for the third quarter of 2014.

2. Calculate the actual and budgeted sales mixes for the three products for the third quarter of 2014.

3. Calculate total sales-volume, sales-mix, and sales-quantity variances for the third quarter of 2014. (Calculate all variances in terms of contribution margins.)

4. Given that your CEO is known to have temper tantrums, you want to be well prepared for this meeting. In order to prepare, write a paragraph or two comparing actual results to budgeted amounts.

Transcribed Image Text:

PalmPro PalmCE PalmKid Selling Price $380 274 146 Variable Cost per Unit $185 97 65 Contribution Margin per Unit $195 177 81 Sales Volume in Units 5,550 44,400 61,050 111,000 PalmPro PalmCE PalmKid Selling Price $351 284 115 Variable Cost per Unit $180 92 73 Contribution Margin per Unit $171 192 42 Sales Volume in Units 4,600 49,450 60,950 115,000 PalmPro PalmCE PalmKid Selling Price $380 274 146 Variable Cost per Unit $185 97 65 Contribution Margin per Unit $195 177 81 Sales Volume in Units 5,550 44,400 61,050 111,000 PalmPro PalmCE PalmKid Selling Price $351 284 115 Variable Cost per Unit $180 92 73 Contribution Margin per Unit $171 192 42 Sales Volume in Units 4,600 49,450 60,950 115,000

Answer rating: 100% (QA)

The HI manufacturing company budgeted market share based on total sales is 25 The budgeted sales of the company were estimated at 444000 units and the ... View the full answer