Chapter 16 revenues sales variances and customer profitability analysis
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Chapter 16 Revenues, Sales Variances, and Customer Profitability Analysis. Revenue Allocation. Revenue allocation occurs when revenues, related but not traceable to individual products (services or customers), are assigned to individual products

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Chapter 16 Revenues, Sales Variances, and Customer Profitability Analysis

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Chapter 16 revenues sales variances and customer profitability analysis

Chapter 16Revenues, Sales Variances, and Customer Profitability Analysis


Revenue allocation

Revenue Allocation

  • Revenue allocation occurs when revenues, related but not traceable to individual products (services or customers), are assigned to individual products

  • a Bundled product is a package of two or more products or services, sold for a single price, each with their own stand-alone prices

  • Often called suite sales

  • Allocate revenues to products based on

    • selling prices or unit costs

    • physical units

    • stand-alone product revenues

    • incremental revenues

Pages 599 - 600


Revenue allocation stand alone

Revenue Allocation – Stand Alone

WordMaster

$250

SpreadMaster

$300

FinanceMaster

$450

Suite price for all three products = $760

Allocation based on Stand-Alone Prices

WordMaster$250 / $1,000 x $760 = $190

SpreadMaster$300 / $1,000 x $760 = 228

FinanceMaster $450 / $1,000 x $760 = 342

$760

Pages 600 - 601


Revenue allocation incremental

Revenue Allocation - Incremental

WordMaster

$250

FinanceMaster

$450

SpreadMaster

$300

Suite price for all three products = $760

Allocation based on Incremental Prices *

FinanceMaster $450

SpreadMaster 300

FinanceMaster ($760 - $450 - $300) 10

$760

* Assume primary product is Finance, then Spread, then Word

Pages 600 - 601


Sales volume variance

Sales Mix

Variance

Sales Quantity

Variance

Market Size

Variance

Market Share

Variance

Sales Volume Variance

Static Budget Variance

Flexible Budget Variance

Sales Volume Variance

Sales Volume Variance

= (actual unit sales - budgeted unit sales) x budgeted contribution margin per unit

Pages 603 - 606


Sales mix and sales quantity variances

Sales-Mix and Sales-Quantity Variances

Sales-mix variance

ActualActualBudgetedBudgeted

= units of allx sales-salesxcontribution

products soldmix %mix %margin per unit

Sales-quantity variance

ActualBudgetedBudgetedBudgeted

=units of all-units of allxsalesxcontribution

products soldproducts soldmix %margin per unit

Pages 606 - 608


Market share and market size variances

Market-Share and Market-Size Variances

Market-share variance

ActualActualBudgetedBudgeted average

= market sizexmarket-marketxcontribution

in unitsshare %share %margin per unit

Market-size variance

ActualBudgetedBudgetedBudgeted average

= market size-market sizexmarketxcontribution

in unitsin unitsshare %margin per unit

Pages 608 - 610


Customer profitability analysis

Customer Profitability Analysis

Consider profitability of individual customers taking into account:

  • customer specific costs

  • distribution channel costs

  • customer support costs

  • corporate sustaining costs

    Look at customers in terms of

  • short-run and long-run profitability

  • likelihood of retention

  • growth potential

  • increases in overall demand from well-known customers

  • ability to learn from a customer

Pages 611 - 616


Mix and yield variances for inputs

Mix and Yield Variances for Inputs

Mix variance

ActualBudgetedActual totalBudgeted

= input-inputxinputsxprice per

mix %mix %usedinput unit

Yield variance

Actual totalBudgeted totalBudgetedBudgeted

= units of-units ofxinputxprice per

input usedinputs usedmix %input unit

Pages 620 - 623


Mix and yield variances

Price

Variance

Efficiency

Variance

Mix

Variance

Yield

Variance

Mix and Yield Variances

Static Budget Variance

Flexible Budget Variance

Sales Volume Variance

Pages 620 - 623


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