To understand how differences between budgeted and actual profits can be analyzed using the general variance framework To illustrate the use of contribution margin as a surrogate for profit in profitability analysis To understand the computation and interpretations of CM flexible budget and volume variances, along with related CM mix and quantity variances WISCONSIN CORPORATION PART ONE Let's assume that the company sells ONE product. Its budgeted sales were 40,000 units and $4,500,000. Actual unit sales totaled 42,000 and $4,200,000. REQUIRED: 1) Compute the Sales Budget Variance (Total Revenue Variance). 2) Break the Sales Budget Variance into Sales Price Variance and Sales Volume Variance. 3) Interpret the variances above. PART TWO ...... makes and sells two types of Widgets: Widget Alpha and Widget Beta. Budgeted and actual data for the two widgets is as follows: Widget A Widget B Total Budgeted Amounts: Sales: 25,000 $90 $ 2.250.000 15,000 $150 $ 2.250.000 $ 4,500,000 Variable expenses 500,000 750,000 1,250,000 Contribution margin $ 1,750,000 $ 1.500,000 $3,250,000 a @ Actual Amounts Sales: 25,800 14,000 Variable expenses Contribution margin $88 $ 2.270.400 $160 541,800 $ 1.728.600 $ 2.240.000 742,000 $ 1.498.000 $_4,510,400 1,283,800 $ 3.226.600 Required: Sales Variances (do all variances in total and for each product) 1. Compute the total sales variance (also called the static budget variance): Budgeted sales - Actual sales. 2. Compute the sales volume volume variance and flexible budget variance (sales price variance). In other words, how much of the change in REVENUES was caused by the sales volume? How much was caused by difference in average sales price? 3. Further analyze the sales volume variance in by breaking it down into sales mix and sales quantity variances. In other words, how much of difference in sales was caused by the difference in the quantity sold, and how much was due to the difference in mix of products sold? 4. INTERPRET YOUR RESULTS from (1-6) ABOVE. What additional information or analysis would we do to bring further meaning to this? Required: Sales Variances (do all variances in total and for each product) 1. Compute the total sales variance (also called the static budget variance): Budgeted sales - Actual sales. 2. Compute the sales volume volume variance and flexible budget variance (sales price variance). In other words, how much of the change in REVENUES was caused by the sales volume? How much was caused by difference in average sales price? 3. Further analyze the sales volume variance in by breaking it down into sales mix and sales quantity variances. In other words, how much of difference in sales was caused by the difference in the quantity sold, and how much was due to the difference in mix of products sold? 4. INTERPRET YOUR RESULTS from (1-6) ABOVE. What additional information or analysis would we do to bring further meaning to this