Sales Variances Foote Corporation produces and sells two lines of shoes: Runner
ID: 2528302 • Letter: S
Question
Sales Variances
Foote Corporation produces and sells two lines of shoes: Runner and Dress shoes.
The ACTUAL results for 2017 were:
Runner Dress Shoes
Sales Volume (units) 225,000 95,000
Sales Revenue $ 7,042,500 $5,795,000
Total Variable cost 2,902,500 3,192,000
The BUDGET results for 2017 were:
Runner Dress Shoes
Sales Volume (units) 280,000 70,000
Sales Revenue $ 9,100,000 $4,025,000
Total Variable cost 3,248,000 2,247,000
Additional Information
Market size(units): Runner Dress Shoes
2017 Actual 1,325,000 175,000
2017 Budget 1,530,000 220,000
Required:
1)(20 Marks) Calculate the following (DON’T FORGET TO CALCULATE THE CM/U)
a) Sales Price Variance b) Sales Volume Variance
c)Sales Mix Variance d) Sales Quantity Variance
e) Market Share Variance
2)Based on your calculations above, provide a brief comment detailing success (improvement or gain) and one failure(loss or miss) the sales team experienced in 2017 (5Markes)
Explanation / Answer
Standard Sellling price per unit
Runner = 9100000/280000 = 32.5 per unit
Dress shoes = 4025000/70000 = 57.5 per unit
Actual selling price per unit:
Runner = 7042500/225000 = 31.3
Dress shoes = 5795000/95000 = 61
1 a)Sales price variance = (Actual price - Budgeted Price)*Actual sales qty
Runner = (31.3 - 32.5)*225000 = 270000 U
Dress shoes = (61 - 57.5)*95000 = 332500 F
b). Sales volume variance : (Actual Qty - Budgeted Qty)*Budgeted price
Runner = (225000- 280000)*32.5 = 1787500 U
Dress shoes = (95000-70000)*57.5 = 1437500 F
c). Sales mix variance = Total Actual Qty (Average budgeted price per unit of actual mix - Average budgeted price per unit of budgeted mix)
Total Actual Qty = 225000+95000 = 320000
Total Std Qty = 280000+70000 = 350000
Average budgeted price per unit of actual mix:
Runner = 225000 units * 32.5 per unit = 7312500
Dress = 95000 units * 57.5 per unit = 5462500
Total = 7312500+5462500 = 12775000
Average budgeted price per unit of actual mix = 12775000 / 320000 = 39.921
Average budgeted price per unit of budgeted mix = 13125000/350000 = 37.5
Total Budgeted sales = 9100000+4025000 = 13125000
Sales Mix Variance = 320000 * (39.921 - 37.5) = 774720 F
d). Sales Qty Variance = Average budgeted price per unit of budgeted mix * (Total ACtual Qty - Total Budgeted Qty)
= 37.5 * (320000 - 350000) = 1125000 U
e). Market Share Variance = (Actual market share % - Budgeted market share %) * Actual industry sales qty in units * Average budgeted price per unit.
Actual market share = 320000/(1325000+175000) = 320000/1500000 = 21.33%
Budgeted market share = 350000 / (1530000+220000) = 350000/1750000 = 20%
Market Share variance = (21.33%-20%)* 1500000 units * 37.5 = 748125 F
2). From above calculations it can be said that , sales team gained in Selling price and in sales qty of Dress shoes while incurred loss in selling price and sales qty of Runner shoes.