MANAGEMENT ACCOUNTING - Solutions Manual

CHAPTER 25
MANAGING PRODUCTIVITY AND
MARKETING EFFECTIVENESS
I.

Questions
1. Productivity is the relationship between the output and the input resources
required for generating the output.
2. A critical success factor for a firm that competes as a cost leader is to be
the low cost provider. A low cost provider needs to perform the required
tasks for the same output with fewer resources than its competitors.
3. Among criteria that often are used in assessing productivity and their
advantages and disadvantages are:
Using a prior years productivity as the criterion
Advantages:

Data readily available

Facilitates monitoring of continuous improvements

Disadvantages:

Difficult to assess adequacy of productivity improvements

Hard to compare productivity improvements between the years

Using the best performance as the criterion

Advantages:

Provides as the benchmark the utmost performance

Motivates people to strive for the maximum potential

Disadvantages:

The standard can be too high for the operation and frustrating to
workers
Data may be difficult to obtain
The criteria on which the operation is based may not be comparable

4. An operational productivity is the ratio of the output to the number of

units of an input resource.
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Chapter 25 Managing Productivity and Marketing Effectiveness

A financial productivity measures the relationship between the output and

the cost of one or more of the input resources.
5. A partial productivity is a productivity measure that focuses only on the
relationship between the amount of one of the input resources and the
output attained.
A total productivity measures the relationship between the output and the
total input costs of all the required input resources for the output.
6. Manufacturing personnel often prefer operational productivity measures
over financial productivity measures because all the input data for
computing operational productivity measures are either results of their
activities or resources consumed for these activities.
Financial
productivity measures use costs of resources that often are results of
activities by personnel outside of manufacturing functions.
7. Measurements of marketing effectiveness include market share, sales
price, sales mix, and sales quantity variances.
8. Sales quantity variance is a component of sales volume variance. A sales
volume variance can be the result of both sales mix and sales quantity
variances.
9. A market size variance measures the effect on the contribution margin and
operating income of a firm because of changes in the total market size for
all firms in the same industry or product segment. A market share
variance examines the effect on the contribution margin and operating
income of a firm because of deviations of the firms actual market shares
from its budgeted market shares.
10. a. No. A multi-product firm can still have an unfavorable sales volume
variance even if it sells more than the budgeted units of sales. The
unfavorable sales volume variance is a result of selling more of less
profitable products and less of more profitable products.
b. A favorable sales quantity variance reflects the marketing managers
excellent performances only if there is no adverse change in selling
prices, sales mix, or market size. A favorable sales quantity variance
is hardly favorable to the firm if the firm has lowered its selling prices
or sold more of low-priced, low-margin and less of high-priced, highmargin products. Increases in the total market size in which the firm
operates often also leads to a favorable sales quantity variance. A
favorable sales quantity variance in an expanding total market may
not be favorable to the firm strategically if the firm also has an
unfavorable market share variance.
25-2

Managing Productivity and Marketing Effectiveness Chapter 25

A firm can have a favorable market size variance and an unfavorable

market share variance if the proportional increase of the firms total
sales is less than those of the total market.
c. Yes. The Wall Street Journal reported on April 14, 1994 (p. B4) that
Colgate-Palmolive had slashed marketing spending to reach its
ambitious target of 15 percent annual earnings growth. The firm, for
example, spent P88.8 million on advertising in 1993, compared with
P97.5 million in 1992. The firm met the goal of a 15 percent increase
in per share earnings and its CEO, Mr. Mark, expected the company
to announce a similar increase for first quarter earnings soon. The
market share of the firm, however, have decreased in all categories.
11. The sales volume variance is the sum of sales quantity and sales mix
variances. The sales quantity variance is the sum of market size and
market share variances.
II. Problems
Problem 1 (Operational and Financial Partial Productivity)
Requirement 1
Star Company
Comparative Income Statement
For the years 2005 and 2006
Sales
Variable cost of sales:
Materials
Labor
Power
Total variable costs of sales
Contribution margin

15,000 x P40 =
12,000 x P 8 =
6,000 x P20 =
1,000 x P 2 =

2005
P600,000
P 96,000
120,000
2,000
P218,000
P382,000

18,000 x P40 =
12,600 x P10 =
5,000 x P25 =
2,000 x P 2 =

2006
P720,000
P126,000
125,000
4,000
P255,000
P465,000

Change in profits from 2005: P465,000 P382,000 = P83,000 increase

Requirement 2
Operational Partial Productivity
DM
DL
Power

2006
18,000 / 12,600 = 1.4286
18,000 / 5,000 = 3.6
18,000 / 2,000 = 9
25-3

2005
15,000 / 12,000 =
15,000 / 6,000 =
15,000 / 1,000 =

1.25
2.5
15

Chapter 25 Managing Productivity and Marketing Effectiveness

Requirement 3
Total cost of production factors
DM
DL
Power

2006
2005
12,600 x P10 = P126,000 12,000 x P 8 = P 96,000
5,000 x P25 = P125,000 6,000 x P20 = P120,000
2,000 x P 2 = P 4,000 1,000 x P 2 = P 2,000

Financial Partial Productivity

DM
DL
Power

2006
18,000 / 126,000 = 0.1429
18,000 / 125,000 = 0.144
18,000 / 4,000 = 4.5

2005
15,000 / 96,000 = 0.15625
15,000 / 120,000 = 0.125
15,000 / 2,000 = 7.5

Requirement 4
Both direct materials and direct labor operation partial productivity improved
from 2005 to 2006. In 2006 the firm was able to manufacture more output
units for each unit of materials placed into production and for each hour spent
on production. The operational productivity of power in 2006 deteriorated
from 2005. It is likely that the firm used more equipment in production in
2006 that reduced consumption of materials and production hours.
The financial partial productivity for both direct materials and power
deteriorated from 2005 to 2006. Increases in direct materials costs were more
than the improvements in operational partial productivity for direct materials.
Like the operational partial productivity, the financial partial productivity for
direct labor also improved. The extent of improvements, however, is much
lower in financial partial productivity. The direct labor operational partial
productivity improved 44 percent in 2006 over those of 2005. The financial
partial productivity, however, improved only 15.2 percent between the two
years. The decrease in financial partial productivity is likely a result of
increases in direct labor wages.
Requirement 5
Operating Data for Decomposing Financial Productivity Measure
2006 Output,

2006 Output

2006 Output
25-4

2005 Output

Managing Productivity and Marketing Effectiveness Chapter 25

1/2006
Productivity
2006 Input cost

1/2005
Productivity
2006 Input cost

1/2005
Productivity
2005 Input cost

1/2005
Productivity
2005 Input cost

18,000

18,000

15,000

12,000/15,000
= 0.8
6,000/15,000
= 0.4
1,000/15,000
= 0.0667

12,000/15,000
= 0.8
6,000/15,000
= 0.4
1,000/15,000
= 0.0667

12,000/15,000
= 0.8
6,000/15,000
= 0.4
1,000/15,000
= 0.0667

P 8
P20
P 2

P 8
P20
P 2

18,000 x 0.8 x 10
= P144,000
18,000 x 0.4 x 25
= P180,000
18,000 x 0.0667 x 2
= P2,401
P326,401

18,000 x 0.8 x 8
= P115,200
18,000 x 0.4 x 20
= P144,000
18,000 x 0.0667 x 2
= P2,401
P261,601

15,000 x 0.8 x 8
= P96,000
15,000 x 0.4 x 20
= P120,000
15,000 x 0.0667 x 2
= P2,001
P218,001

18,000 / 144,000
= 0.125

18,000 / 115,200
= 0.15625

15,000 / 96,000
= 0.15625

18,000 / 180,000
= 0.1
18,000 / 2,401
= 7.4969

18,000 / 144,000
= 0.125
18,000 / 2,401
= 7.4969

15,000 / 120,000
= 0.125
15,000 / 2,001
= 7.4963

(1) Output (unit):

18,000
(2) 1/Productivity
DM: 12,600/18,000
= 0.7
DL: 5,000/18,000
= 0.2778
Power: 2,000/18,000
= 0.1111

(3) Cost per unit of input

DM:
P10
DL:
P25
Power: P 2

P10
P25
P 2

(4) Output x (1/Productivity) x Input cost

DM: 18,000 x 0.7 x 10
= P126,000
DL: 18,000 x 0.2778 x 25
= P125,010
Power: 18,000 x 0.1111 x 2
= P4,000
Total P255,010

Decomposition
DM: 18,000 /
126,000
= 0.1429
DL: 18,000 / 125,010
= 0.1440
Power: 18,000 /
4,000
= 4.5

Productivity change
DM:

0.1429 0.125
= 0.0179 F

Input price change

0.125 0.15625
= 0.03125 U
25-5

Output change
0.15625 0.15625
=0

Chapter 25 Managing Productivity and Marketing Effectiveness

DL:

0.144 0.1
= 0.044 F
Power: 4.5 7.4969
= 2.9969 U

0.1 0.125
= 0.025 U
7.4969 7.4969
=0

0.125 0.125
=0
7.4969 7.4963
= 0.0006 (rounding)

Summary of Result

DM:
DL:
Power:

Productivity
Change
0.0179 F
0.044 F
2.9969 U

Input Price
Change
0.03125 U
0.025 U
0

Total
Change
0.01335 U
0.019 F
2.9969 U

Change as % of 2005 Productivity

Productivity Input Price
Total
Change
Change
Change
11.46% F 20% U
8.54% U
35.2% F 20% U
15.2% F
39.98% U 0
39.98% U

Requirement 6
Productivity for both direct materials and direct labor improved in 2006. The
percentages of improvements in productivity are 11.46 and 35.2 for direct
materials and direct labor, respectively, of the 2005 productivity. However,
cost increases in direct materials and direct labor reduced the gains in
productivity on these two manufacturing factors.

Problem 2 (Direct Labor Rate and Efficiency Variances, Productivity

Measures, and Standard Costs)
Requirement 1
Assembly Department Direct Labor Variances
2005:
Total actual direct labor hours:
Total standard direct labor hours:
P30 x 500,000
= P15,000,000

25 x 20,000 = 500,000
24 x 20,000 = 480,000

P28 x 500,000
= P14,000,000

25-6

P28 x 480,000
= P13,440,000

Managing Productivity and Marketing Effectiveness Chapter 25

Rate variance
= P1,000,000 U

Efficiency variance
= P560,000 U

2006:
Total actual direct labor hours:
Total standard direct labor hours:
P36 x 400,000
= P14,400,000

20 x 20,000 = 400,000
21 x 20,000 = 420,000

P35 x 400,000
= P14,000,000

Rate variance
= P400,000 U

P35 x 420,000
= P14,700,000
Efficiency variance
= P700,000 F

Testing Department Direct Labor Variances

2005:
Total actual direct labor hours:
Total standard direct labor hours:
P20 x 240,000
= P4,800,000

12 x 20,000 = 240,000
14 x 20,000 = 280,000

P21 x 240,000
= P5,040,000

Rate variance
= P240,000 F

Efficiency variance
= P840,000 F

2006:
Total actual direct labor hours:
Total standard direct labor hours:
P24 x 200,000
= P4,800,000

P21 x 280,000
= P5,880,000

10 x 20,000 = 200,000
11 x 20,000 = 220,000

P25 x 200,000
= P5,000,000

Rate variance
= P200,000 F

P25 x 220,000
= P5,500,000
Efficiency variance
= P500,000 F

Recap:
Rate variance
Efficiency variance

Assembly Department
2005
2006
P1,000,000 U P400,000 U
P560,000 U
P700,000 F
25-7

Testing Department
2005
2006
P240,000 F
P200,000 F
P840,000 F
P500,000 F

Chapter 25 Managing Productivity and Marketing Effectiveness

Requirement 2
Assembly Department Operational Partial Productivity
2005:
2006:

20,000 / 500,000 = 0.04

20,000 / 400,000 = 0.05

Testing Department Operational Partial Productivity

2005:
2006:

20,000 / 240,000 = 0.0833

20,000 / 200,000 = 0.1

Requirement 3
Assembly Department Financial Partial Productivity
2005:
2006:

20,000 / P15,000,000 = 0.001333

20,000 / P14,400,000 = 0.001389

Testing Department Financial Partial Productivity

2005:
20,000 / P4,800,000 = 0.004167
2006:
20,000 / P4,800,000 = 0.004167
Requirement 4
Operational partial productivity
Assembly
Testing

2005
0.04
0.0833

2006
0.05
0.1

0.01
0.0167

Change
F
25%
F
20%

F
F

Financial partial productivity

Assembly
Testing

2005
0.001333
0.004167

2006
0.001389
0.004167

Change
0.000056 F
4.2%
-0-0-

Operational partial productivity improved in both departments from 2005 to

2006. The financial partial productivity in the Assembly also improved while
the Testing remains unchanged.
Requirement 5

25-8

Managing Productivity and Marketing Effectiveness Chapter 25

The standards in a standard costing system often are determined independently

and incorporate changes in operating factors. The standard for the operation
of a year may change because of changes in, for example, technology, quality
of materials, experience of production workers, designs, or processes.
Productivity measures use as the criterion the productivity of a prior year
without adjusting for changes occurred or the expected changes for the current
year. As a result, assessments of productivity may depict an entirely different
picture than those of variance analyses in a standard costing system.

Problem 3 (Sales Variance)

Requirement 1
Selling price variances (in 000)
Flexible budget sales:

Premium
Regular

Barrels
Sales

Master Budget for 2005

Budgeted
Total Units
Total
Selling Price
Sold in
Sales
Units
Per Unit
2005
P150
x
180 =
P36,000
240 =
P120
x
540 =
P43,200
360 =
Premium
Regular
Selling
Flexible
Price
Flexible
Actual
Budget
Variance
Actual
Budget
180
180
540
540
P28,800
P27,000
P1,800 F
P62,100
P64,800

Flexible
Budget
Sales
P27,000
P64,800
Selling
Price
Variance
P2,700 U

Total selling price variance of the firm = P1,800 F + P2,700 U = P900 U

Requirement 2
Sales volume variances for the period for each of the products and for the firm
25-9

Chapter 25 Managing Productivity and Marketing Effectiveness

Flexible budget variable expenses:

Master Budget for 2005
Total
Variable
Number of
Expenses
Units
P21,600
240 =
P27,000
360 =

Premium
Regular

Budgeted
Variable
Expenses
Per Unit
P90
x
P75
x

Total
Units
Sold in
2005
180 =
540 =

Premium

Barrels
Sales
Variable
expenses
Contribution
margin
Fixed
expenses
Operating
income

Regular

Flexible
Budget
180
P27,000

Master
Budget
180
P36,000

16,200

21,600

P10,800

P14,400

10,000
P

800

Flexible
Budget
Variable
Expenses
P16,200
P40,500

Sales
Volume
Variance

Sales
Volume
Variance

Flexible
Budget
540
P64,800

Master
Budget
360
P43,200

40,500

27,000

P3,600 U

P24,300

P16,200

P8,100 F

10,000

5,000

5,000

P 4,400

P3,600 U

P19,300

P11,200

P8,100 F

Total sales volume variance of the firm = P3,600 U + P8,100 F = P4,500 F

Requirement 3
Sales quantity variances for the firm and for each of the products. (See next
page.)
Requirement 4
Sales mix variances for the period for each of the products and for the firm
(000 omitted).
Calculation for sales mixes:

Premium
Regular

Budgeted
Total Sales
Sales
in Units
Mix
240
0.40
360
0.60
600
1.00
Flexible Budget
Total actual units of all
products sold x Actual

Total actual units of

all products sold x

25-10

Actual
Total Sales
in Units
180
540
720

Sales
Mix
0.25
0.75
1.00

Master Budget
Total budgeted units of
sales for all products x

Managing Productivity and Marketing Effectiveness Chapter 25

sales mix x Standard
contribution margin per
unit

Budgeted sales mix x

Standard contribution
margin per unit

Budgeted sales mix x

Standard contribution
margin per unit

720 x 0.25 x P60 = P10,800

720 x 0.40 x P60 = P17,280

Premium

Sales mix variance

= P6,480 U

600 x 0.40 x P60 = P14,400

Sales quantity variance

= P2,880 F

Sales volume variance

= P10,800 P14,400
= P3,600 U

To verify: Sales volume variance

= Sales mix variance + Sales quantity variance
=
P6,480 U
+
P2,880 F
=
P3,600 U
Regular
720 x 0.75 x P45 = P24,300

720 x 0.60 x P45 = P19,440

Sales mix variance

= P4,860 F

600 x 0.60 x P45 = P16,200

Sales quantity variance

= P3,240 F

Sales volume variance

= P24,300 P16,200
= P8,100 F
To verify: Sales volume variance
= Sales mix variance + Sales quantity variance
=
P4,860 F
+
P3,240 F
=
P8,100 F
Total
Sales mix variance
= P6,480 U + P4,860 F = P1,620 U
Sales quantity variance = P2,880 U + P3,240 F = P6,120 F

25-11

Chapter 25 Managing Productivity and Marketing Effectiveness

Requirement 5
Verification
Premium
Regular
Total

Sales mix variance +

P6,480 U
P4,860 F
P1,620 U

Sales quantity variance =

P2,880 F
P3,240 F
P6,120 F

Sales volume variance

P3,600 U
P8,100 F
P4,500 F

Requirement 6
Market size variances. (See below.)
Requirement 7
Market share variances (000 omitted. See below.)
Weighted average budgeted contribution margin per unit
Master budget total contribution margin
P30,600
Master budget total sales units
600
Weighted-average budgeted contribution margin per unit P
51
Calculation for market shares:
Budgeted: Total sales in units 600 Total sales of the industry 1,500 = 0.40
Actual:
Total sales in units 720 Total sales of the industry 1,600 = 0.45
Calculation for variances:
Actual total market
size x Actual market
share x Average
budgeted contribution
margin per unit
1,600 x 0.45 x P51
= P36,720

Actual total market x

Budgeted market
share x Average
budgeted contribution
margin per unit
1,600 x 0.40 x P51
= P32,640

Market share variance

= P4,080 F

Market size variance

= P2,040 F

Sales quantity variance

= P4,080 F + P2,040 F
= P6,120 F

Requirement 8
25-12

Budgeted total market

size x Budgeted market
share x Average
budgeted contribution
margin per unit
1,500 x 0.40 x P51
= P30,600

Managing Productivity and Marketing Effectiveness Chapter 25

The sum of market size variance and market share variance and verification
that this total equals the sales quantity variance.
Total market size variance + Total market share variance =
P2,040 F
P4,080 F

Total quantity variance

P6,120 F

Problem 4 (Productivity and Ethics)

Requirement 1
The operational partial productivity deteriorates slightly from 0.0051 in 2005
(500/99,000) to 0.005 in 2006 (560/112,000). Manipulating accounting
numbers in order to show a desirable result is an unethical behavior regardless
the intention.

Requirement 2
Tan should not follow the order without following a consistent accounting
method. If the firm believes that certain cost items should be reclassified as
indirect costs, the same procedure should be followed for all years. Tan
should then go back and revise operating results of previous years.
Problem 5 (Small Business Market Size and Share Variances)
Requirement 1

WS
DH

Empress
Designs
50
25

Budget
Industry
500
200

Share
10.0%
12.5%

Empress
Designs
45
35

Actual
Industry
425
150

Share
45/425
35/150

Requirement 2
Weighted Average Budgeted Contribution Margin Per Unit:
(50 welcome signs x P2) + (25 doghouses x P5.20) / 75 = P3.07
Market Share Variance
25-13

Chapter 25 Managing Productivity and Marketing Effectiveness

Welcome Signs: (45/425 0.1) x 425 x P3.07 = P7.68 F

Doghouses: (35/150 25/200) x 150 x P3.07 = P49.89 F
Requirement 3
Market Size Variance
Welcome Signs: (45 500) x 50/500 x P3.07 = P23.03 U
Doghouses: (150 200) x 25/200 x P3.07 = P19.19 U
Requirement 4
Among possible reasons are quality changes, pricing changes, less producers
due to seasonal variations, and market no longer there.

Requirement 5
Among alternatives are improving costs through adopting activity based
costing, making different signs, using less expensive wood, finding competitive
advantage.
III. Multiple Choice Questions
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

A
C
B
D
A
C
C
B
C
D

11.
12.
13.
14.
15.
16.
17.
18.
19.
20.

A
B
A
B
C
D
B
C
A
D

21.
22.
23.
24.

A
D
C
D

Supporting Computations:
Operational partial productivity
Output

2005
Input

Partial

25-14

Output

2006
Input

Partial

Managing Productivity and Marketing Effectiveness Chapter 25

X-45
Direct
labor

60,000

Resource
Used
Productivity
75,000 =
0.8

64,000

(1)
60,000

10,000 =

64,000

6.0

Direct
labor

10,847 =

5.9002

(2)

Financial partial productivity

X-45

Resource
Used
Productivity
89,600 =
0.7143

2005
Cost of Input
Units of
Resource
Partial
Output
Used
Productivity
0.1111
60,000 P540,000 =

2006
Cost of Input
Units of
Resource
Partial
Output
Used
Productivity
0.1050
64,000 P609,280 =

(3)
60,000

300,000 =

0.2

Total productivity in units

(a) Total units manufactured
(b) Total variable manufacturing costs
incurred
(c) Total productivity (a) (b)
(d) Decrease in productivity

64,000 P347,104 =

(4)
2005
60,000

0.1844

2006
64,000

P840,000
P956,384
0.071429 (5) 0.066919
0.071429 0.066919 = 0.00451 (6)

Total productivity in sales pesos

(a) Total sales
(b) Total variable manufacturing costs
incurred
(c) Total productivity (a) (b)
(d) Decrease in productivity

2005
P1,500,000

2006
P1,600,000

P840,000
P1.7857 (5)
P1.7857 P1.6730 =

P956,384
P1.6730
P0.1127 (6)

(7) Operational partial productivity:

Operational Partial Productivity =

Actual Production
Actual Input

9,500
8,950

(8) Financial partial productivity:

(1) Output
(2) Direct materials:
Quantity
Unit cost
Total direct materials cost
25-15

2005
400,000

2006
486,000

160
x P3,375
P540,000

180
x P3,125
P562,500

= 1.06

Chapter 25 Managing Productivity and Marketing Effectiveness

(3) DM financial partial

productivity (1) (2)
(4) Direct labor:
Hour spent
Hourly wage
Total direct labor cost
(5) DL financial partial
productivity (1) (4)

0.7407

0.864

10,000
x
P26
P260,000

13,500
x
P25
P337,500

1.5385

1.44

2005
400,000

2006
486,000

P540,000
260,000
P800,000
0.5

P562,500
337,500
P900,000
0.54

(9) Total productivity:

(1) Output
Total cost:
Direct materials cost
Direct labor cost
(2) Total cost
(3) Total productivity (1) (2)
Market Share
Actual
Budget
1.
2.
3.

Firm
100,000
90,000

Total Market
2,000,000 =
1,500,000 =

/
/

Market Share
5%
6%

Market size variance: (2,000,000 1,500,000) x 0.06 x P8 = P240,000 F (10)

Market share variance: (5% - 6%) x 2,000,000 x P8
= P160,000 U (11)
Sales quantity variance: (100,000 90,000) x P8
= P 80,000 F (12)

(13)
Budgeted sales unit
Budgeted contribution margin per
unit
Budgeted total contribution margin
Budgeted average contribution margin
per unit

Product A
30,000

Product B
60,000

Total
90,000

x P4.00
P120,000

x P10.00
P600,000

P720,000
P8.00

(14)
Actual units sold

Product A
35,000
25-16

Product B
65,000

Total

Managing Productivity and Marketing Effectiveness Chapter 25

Budgets sales unit
Differences in sales units
Budgeted contribution margin per
unit
Sales volume contribution margin
variance

30,000
5,000

60,000
5,000

x P10.00

P4.00
P20,000 F

P50,000 F

P70,000 F

Sales mixes:

Product A
Product B
TOTAL

Budgeted
Unit
%
30,000
1/3
60,000
2/3
90,000
100

Actual
Unit
35,000
65,000
100,000

%
35
65
100

(15)Sales mix contribution margin variance:

Product A: (0.35 1/3) x 100,000 x P4 =
Product B: (0.65 2/3) x 100,000 x P10 =
Total sales mix contribution margin variance

P 6,667 F
16,667 U
P10,000 U

(16)Sales quantity contribution margin variance:

Product A: (100,000 90,000) x 1/3 x P4 =
Product B: (100,000 90,000) x 2/3 x P10 =
Total sales quantity contribution margin variance

P13,333 F
66,667 F
P80,000 F

(17)Weighted average budget contribution margin per unit:

P8.00 (calculated in no. 13)
Market size contribution margin variance:
(2,000,000 1,500,000) x 90,000 / 1,500,000 x P8 = P240,000 F
(18)Market share contribution margin variance:
(100,000 / 2,000,000 90,000 / 1,500,000) x 2,000,000 x P8 =
P160,000 U
(19)Flexible budget contribution margin variance:
Total Contribution margin

25-17

Flexible
Budget
Contribution

Chapter 25 Managing Productivity and Marketing Effectiveness

Product A
Product B
TOTAL

Actual Operating Result

35,000 x P3 = P105,000
65,000 x P12 = P780,000
P885,000

Flexible Budget
35,000 x P4 = P140,000
65,000 x P10 = P650,000
P790,000

Margin Variance
P 35,000 U
P130,000 F
P 95,000 F

(20)Total contribution margin price variance (given)

P50,000 F
Sales price variance:
Product A: (P12 P10) x 35,000 =
P70,000 F
Product B: (P24 P25) x 65,000 =
P65,000 U
Total sales price variance
5,000 F
Total variable cost price variance
P45,000 F
(21)Total flexible budget contribution margin variance
Total contribution margin price variance (given)
Total variance cost efficiency variance

P95,000 F
50,000 F
P45,000 F

(22)Sales mix ratio:

R66
R100
TOTAL

Actual
Quantity
1,000
1,000
2,000

Ratio
0.50
0.50
1.00

Budget
Quantity
1,200
400
1,600

Ratio
0.75
0.25
1.00

R66 sales quantity variance: (2,000 1,600) x 0.75 x P10 = P3,000 F

(23)R100 sales mix variance: (0.5 0.25) x 2,000 x P70 = P35,000 F
(24)Total sales volume variance:
R66:
R100:
Total

(1,000 1,200) x P10 =

(1,000 400) x P70 =

25-18

P 2,000 U
42,000 F
P40,000 F