Original answer only please

Question 3: Sales Variances (15 marks)

The Chair Company manufactures two modular types of chairs: one for the residential (home) market and the other for the office market. Budgeted and actual operating data for the year 2011 are:

Static Budget Actual Results

Home Office Home Office

Number of chairs sold 260,000 140,000 248,400 165,600

Contribution margin $26,000,000 $11,200,000 $22,356,000 $13,248,000

In late 2010, an office-products research firm estimated the industry volume for residential and office chairs of the type sold by the Chair company to be 2,400,000. Actual industry volume for the year 2011 was 2,200,000 chairs.

Required:

a. Compute the sale-mix variance and the sales-quantity variance by type of chair, and in total. (6 marks)

b. Compute the market-share variance and market-size variance. (6 marks)

c. What conclusions can be drawn from these variances? (3 marks)