This is a question for many teens as well as their gift-giving relatives. A similar question weighs

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Question:

This is a question for many teens as well as their gift-giving relatives. A similar question weighs on the minds of manufacturers, only their perspective relates to planning for production and sales for the upcoming year. Hear Ye is one such manufacturer. Before setting firm budgets and targets for the coming year, company management reviews the year just ended. Key information related to last year is as follows.

Speaker Ear Buds

Budgeted volume (units) 12,000 8,000

Actual volume (units) 11,700 6,300

Budgeted selling price (per unit) $80 $80

Actual selling price (per unit) $82 $82

Budgeted variable cost (per unit) $30 $20

Actual variable cost (per unit) $30 $20

A ) Set up a partial income statement through contribution margin for Hear Ye, recognizing appropriate amounts for the actual income statement, flexible budget, and master budget.
(accounts available to use for the income statement are; actual contribution margin, actual sales revenue, actual variable cost, budgeted contribution margin, budgeted sales revenue and budgeted variable cost)

B) Within that framework, calculate and label the sales price variance and the comprehensive sales activity variance. Make note of the key driver(s) behind each of these variances.

C) Calculate and note an appropriate sign for Hear Ye’s sales mix variance. Provide a plausible explanation for this variance. What data might the company look at to better understand this variance?

D) Calculate and note an appropriate sign for Hear Ye’s sales quantity variance for the year. Provide a plausible explanation for this variance. Net this sales quantity variance with the sales mix variance from part (c), and name this combined variance.