Renee’s Rings manufactures college rings. Two models are produced: The Spirit mo
ID: 2497747 • Letter: R
Question
Renee’s Rings manufactures college rings. Two models are produced: The Spirit model with a budgeted price of $620 and a standard variable cost of $320. The Chancellor model has a budgeted price of $1,320 and a standard variable cost of $520. At the beginning of the year, Renee estimated that she would sell 2,100 Chancellor rings and 7,900 Spirit rings. The actual results for the year showed that 1,700 Chancellor rings were sold for total revenues of $1,989,000. A total of 7,200 Spirit rings were sold for revenues of $4,644,000.
Compute the activity variance for Renee’s Rings for the year. ( According to connect this $660,000; Hopefully that saves you some time and effort.)
Compute the mix and quantity variances for the year
Explanation / Answer
Activity Variance = ( Budgeted sales - Actual sales ) * Budgeted contribution margin per unit
Product Chancellor rings = ( 2100 - 1700 ) * 800 = 320000
Product Sprits rings = ( 7900 - 7200 ) * 300 = 210000
Sales Margin Quantity Variance
= Average Budgeted Margin per unit of Budgeted mix * ( Total Actual Quantity (units) - Total Budgeted Quantity Units
= ( 4050000/ 10000 ) * ( 8900 - 10000 ) = 445500 (A)
Sales Margin Mix Variance
= Total Actual Quantity * ( Average Budgeted Margin per unit of Actual mix - Average Budgeted margin per unit of Budgeted mix
= 8900 units * ( 3520000/8900 - 4050000/1000) = 84500(A)
Working Note:
Statement Showing Budgeted Margin, Actual Margin and Standard Margin Product Budgeted Units Budgeted Margin per unit Budgeted Margin Actual Sales Units Actual Margin per unit Actual Margin Standard Margin A B C D E F G=D*B Chancellor ring 2100 800 1680000 1700 650 1105000 1360000 Sprits Rings 7900 300 2370000 7200 325 2340000 2160000 Total 10000 4050000 8900 3445000 3520000