1 / 28

Sales-Variance Analysis

Sales-Variance Analysis. Chapter 14. Calculation of sales variances. Overview of chapter. Calculation of sales variances Interpretation of sales variances. Overview of “Sales” variances. Actual Flexible Static

linette
Download Presentation

Sales-Variance Analysis

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Sales-Variance Analysis Chapter 14

  2. Calculation of sales variances

  3. Overview of chapter • Calculation of sales variances • Interpretation of sales variances

  4. Overview of “Sales” variances Actual Flexible Static Budget Budget |----- Flex. V.-----|-------------- Sales-volume V.---------------| |--- Sales-Mix V.---|----------- Sales-Quant.V.------------| |-- Mkt.-share V. --|-- Mkt.-size V.--| Actual Mkt. size x Actual Mkt. share x Actual sales mix x Actual CM /unit Actual Mkt. size x Actual Mkt. share x Actual sales mix x Budget CM /unit Actual Mkt. size x Actual Mkt. share x Budget sales mix x Budget CM /unit Actual Mkt. size x Budget Mkt. share x Budget sales mix x Budget CM /unit Budget Mkt. size x Budget Mkt. share x Budget sales mix x Budget CM /unit

  5. Things to note: (1) Total number of units of all products sold = market size * market share (2) Number of each product sold = market size * market share * sales mix (3) Average CM / unit = sales mix * CM / unit (4) “Revenue” variances can be calculated by substituting sales price for CM in all of the equations on the prior slide.

  6. Sales-VolumeVariance Components The following information relates to English Languages Institute budget for the year 2003. ProductGrammarTrans.Comp. Selling price per unit $259 $87 $185 Variable cost 189 50 95 Contribution margin per unit $ 70 $37 $ 90

  7. Sales-VolumeVariance Components-budget Product Grammar Translation Composition Cont. margin $70 $37 $90 × Units 3,185 980 735 = Total $222,950 $36,260 $66,150 Sales mix 65% 20% 15% Total budgeted contribution margin = $325,360

  8. Sales-VolumeVariance Components The following are the actual results for English Languages for the year 2003. Product Grammar Translation Composition Selling $/unit $255 $85 $185 Variable cost 180 45 95 Cont. margin per unit $ 75 $40 $ 90

  9. Sales-VolumeVariance Components--actual Product Grammar Translation Composition Cont. margin $75 $40 $90 × Units 2,880 990 630 = Total $216,000 $39,600 $56,700 Sales mix 64% 22% 14% Total actual contribution margin = $312,300

  10. Static-Budget Variance Static- Static- Actual budget budget Productresultsamountvariance Grammar $216,000 $222,950 $ 6,950 U Translation 39,600 36,260 3,340 F Composition 56,700 66,150 9,450 U Total $312,300 $325,360 $13,060 U

  11. Flexible-Budget Variance(actual results “budget”) Actual contribution Unit Actual Productmargin/unitvolumeresults Grammar $75 2,880 $216,000 Translation $40 990 $ 39,600 Composition $90 630 $ 56,700

  12. Flexible-Budget Variance(Flexible budget) Budgeted Actual contribution unit Flexible Productmargin/unitvolumebudget Grammar $70 2,880 $201,600 Translation $37 990 $ 36,630 Composition $90 630 $ 56,700

  13. Flexible-Budget Variance Flexible- Flexible- Actual budget budget Productresultsamountvariance Grammar $216,000 $201,600 $14,400 F Translation $39,600 $ 36,630 $ 2,970 F Composition $56,700 $ 56,700 0 Total flexible-budget variance $17,370 F

  14. Sales-Volume Variance Budgeted contribution ProductActualBudgetmargin Grammar (2,880 – 3,185) × $70 = $21,350 U Translation (990 – 980) × $37 = 370 F Composition (630 – 735) × $90 = 9,450 U Total sales-volume variance $30,430 U

  15. Sales-Mix Variance Sales-mix variance = Actual units of all products sold × (Actual sales-mix percentage – Budgeted sales-mix percentage) × Budgeted contribution margin per unit

  16. Sales-Mix Variance Grammar: 4,500(0.64 – 0.65) × $70 = $3,150 U Translation: 4,500(0.22 – 0.20) × $37 = $3,330 F Composition: 4,500(0.14 – 0.15) × $90 = $4,050 U Total sales-mix variance = $3,870 U

  17. Sales-Quantity Variance Sales-quantity variance = (Actual units of all products sold – Budgeted units of all products sold) × Budgeted sales-mix percentage × Budgeted contribution margin per unit

  18. Sales-Quantity Variance Grammar: (4,500 – 4,900) × 0.65 × $70 = $18,200 U Translation: (4,500 – 4,900) × 0.20 × $37 = $ 2,960 U Composition: (4,500 – 4,900) × 0.15 × $90 = $ 5,400 U Total sales-quantity variance = $26,560 U

  19. Market-Share Variance Example Assume that English Languages Institute derives its total unit sales budget for 2003 from a management estimate of a 20% market share and a total industry sales forecast by Desert Services of 24,500 units in the region. In 2003, Desert Services reported actual industry sales of 28,125 units.

  20. Market-Share Variance Example What is English’s actual market share? 4,500 ÷ 28,125 = 0.16 Budgeted total contribution margin is $325,360. Budgeted number of units is 4,900. What is the budgeted average contribution margin per unit? $325,360 ÷ 4,900 = $66.40

  21. Market-Share Variance Example What is the market-share variance? = Actual market size in units × (Actual market share – Budgeted market share) × Budgeted contribution margin per composite unit for budgeted mix 28,125(0.16 – 0.20) × $66.40 = $74,700 U

  22. Market-Share Variance ExampleAnother way: calculate budgets Actual Market Size ×Actual Market Share × Budgeted Average Contribution Margin Per Unit 28,125 × 0.16 × $66.40 = $298,800 Actual Market Size ×Budgeted Market Share × Budgeted Average Contribution Margin Per Unit 28,125 × 0.20 × $66.40 = $373,500 $373,500 – $298,800 = $74,700 U

  23. Market-Size Variance Example Market-size variance = (Actual market size in units – Budgeted market size in units) × Budgeted market share × Budgeted contribution margin per composite unit for budgeted mix (28,125 – 24,500) × 0.20 × $66.40 = $48,140 F

  24. Market-Size Variance ExampleAnother way: calculate budgets Actual Market Size× Budgeted Market Share × Budgeted Average Contribution Margin Per Unit 28,125 × 0.20 × $66.40 = $373,500 Static Budget: Budgeted Market Size × Budgeted Market Share × Budgeted Average Contribution Margin Per Unit 24,500 × 0.20 × $66.40 = $325,360 $373,500 – $325,360 = $48,140 F

  25. Summary of Variances Level 1 Static-Budget Variance 13,060 U Level 2 Flexible-Budget Variance $17,370 F Sales-Volume Variance $30,430 U

  26. Summary of Variances Level 2 Sales-Volume Variance $30,430 U Level 3 Sales-Mix Variance $3,870 U Sales-Quantity Variance $26,560 U

  27. Summary of Variances Level 3 Sales-Quantity Variance $26,560 U Level 4 Market-Share Variance $74,700 U Market-Size Variance $48,140 F

  28. Another ExampleBOZOtronics(on class webpage)****************End of Chapter 14

More Related