Question: B U D G E T Model Selling price Variable cost per unit Sales Volume in units Hydro-1 $ 650 $ 280 5,775 AiRRow 1,095
| B U D G E T | ||||
| Model | Selling price | Variable cost per unit | Sales Volume in units | |
| Hydro-1 | $ 650 | $ 280 | 5,775 | |
| AiRRow | 1,095 | 845 | 2,310 | |
| Magno-2 | 1,695 | 1,185 | 3,465 | |
| Total | 11,550 | |||
The total sales figure represents 11% of the budgeted rowing machine market in the area where RU sells its rowing equipment. Anh is fairly confident that the mix of each rowing machines sales to total is stable.
It is year end and Corey, the cost accountant, has just printed off the raw data for the year and provided Diego and Anh with the following results:
| A C T U A L | |||||
| Model | Selling price | Variable cost per unit | Sales Volume in units | ||
| Hydro-1 | $ 665 | $ 275 | 5,355 | ||
| AiRRow | 1,117 | 845 | 3,465 | ||
| Magno-2 | 1,790 | 1,250 | 3,780 | ||
| Total | 12,600 | ||||
Anh is thrilled to see that her sales team has yet again beat the budget by selling a total of 12,600 rowing machines over the past 12 months. Diego has asked Corey to prepare the year-end bonuses to the sales team. He is also planning a company year end event which is an evening online dinner party (via Uber Eats) to celebrate the achievement.
Corey meets with you, the controller, to review the results and give your permission to go ahead with bonuses and the dinner party plans.
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Required
- Calculate the sales volume variance for all three rowing machine models individually and in total (show calculations).
Hydro-1 (5335-5775)*650 = -273000 AiRRow (3465-2310)*1095 = 1264725 Magno-2 (3780-3465)*1695 = 533925 TOTAL 1525650
- Calculate the sales mix variance for all three rowing machines individually and in total.
Hydro-1 (5355-6300)*650 = -614250 AiRRow (3465-2520)*1095 = 1034775 Magno-2 (3780-3780)*1695 = 0 TOTAL 420525
- Calculate the sales quantity variance for all three products individually and in total. Hydro-1 525*650 = 341250 AiRRow 210*1095 = 229950 Magno-2 315*1695 = 533925 TOTAL 1105125
When answering the following qualitative questions, remember to use figures from your analysis.
- By now, you should have discovered that the sales volume variance is favourable. Explain how the sales mix and sales quantity variances provide further insight into the sales volume variance. (HINT: At a level of 12,600 rowing machines sold, RU should have had higher profits.) from sales quantity variance it has been observed that the company has made massive profit due to higher sales than budgeted
- Based on your analysis from part 4 and assuming sales staff wanted to maximize sales commissions, discuss the effectiveness of the method in which sales commissions are granted.
- As controller, you ask Diego to provide you with year-end actual market volume figures. He tells you that the actual market size for rowing machines for the year was 120,000 rowing machines. Using this information and appropriate information from the question, calculate the following:
- The market size variance
- The market share variance
7. What do the market variances tell you about the success of the sales department? Should the sales bonuses be approved? Why or why not? Should the bonus policy be reviewed? If so, what should be considered?
JUST NEED HELP ON QUESTION 5 - 7 PLEASE
JUST NEED HELP ON QUESTION 5 - 7 PLEASE
JUST NEED HELP ON QUESTION 5 - 7 PLEASE
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