Cost Management

Use the following information for brief exercises 16-22 through 16-24 involving: CompuWorld sells two RISC chips, R66 and R100, to small machine tool manufacturers. Pertinent data for 2005 follow:

Budgeted Actual

R66 R100 R66 R100

Selling price per chip $ 50 $160 $ 55 $ 155

Variable cost per chip 40 90 43 95

Contribution margin $ 10 $ 70 $ 12 $ 60

Fixed cost per chip 6 30 5 25

Operating income $ 4 $ 40 $ 7 $ 35

Sales in units 1,200 400 1,000 1,000

What is the R66 sales quantity variance?

a. $400 F

b. $1,000 F

c. $1,200 F

d. $3,000 F

e. $3,600 F

Answer

Sales Mix Ratio:

                                                Actual                          Budget              

                                      Quantity     Ratio           Quantity    Ratio

                        R66            1,000           .5               1,200        .75

                        R100          1,000           .5                   400        .25

                        Total          2,000            1               1,600        1.0

           R66 sales quantity variance: (2,000 - 1,600) x .75 x $10 = $3,000 F