Contibution Margin

PRODUCT PRICING AND
GROSS PROFIT VARIANCE

ANALYSIS part4
- D.D.B.A
Contribution Margin Variance Analysis

Sample Problem #5:
Crispy Corporation
Comparative Income Statement Data
For the Years Ended, December 31, 2011 and 2012
2011
Sales
2012
90,000
Increase(Decrease)
96,000
6,000
Less: Variable Costs
54,000
52,000
(2,000)
Contribution Margin
36,000
44,000
8,000
3,600
4,000
400
Unit Sold
Unit Sales Price
Unit Variable Costs
25
15
24
13
P
P
(1)
(2)

Solution:
Sales Variances:
Sales Price Variance [4,000u x (P 1)]
(4,000)
Sales Quantity Variance (400u x P 24)
10,000
6,000
Variable Cost Variances:

Variable Cost Price Variances [4,000u x (P 2)] P
Variable Cost Quantity Variances (400u x P15)
(2,000)
Net Contribution Margin Variance
(8,000)
6,000
P
8,000
Gross Profit Variance Analysis

(only one variance ratio is given)
Sales Variances:
QSTY x USPTY = Sales this year
QSTY x USPLY = Applied Sales this year
QSLY x USPLY = Sales last year
Sales Price Variance

Sales Quantity
Variance
Where:
QSTY Quantity Sold this year
USPTY Unit Sales this year
QSLY Quantity Sold last year
USPLY Unit Sales last year

For example:
USPLY = P 200 QSLY = P 40,000
USPTY = P 240 QSTY = P 44,000
Sales Price Variance Ratio = 20% (P40/P200), where P40 = P 240 P 200.
Sales Quantity Variance Ratio = 10% (P4,000/P40,000), where 4T = 44T-40T.
Given:Formula:
1. Sales price variance ratio: STY @ USPTY
(1 Sales price variance ratio)
2. Sales quantity variance ratio: STY @ USPLY=
Sales this year
Sales
x
last year
(1 Sales
quantity variance
ratio)

Cost this year
= QSTY x UCPTY
Cost this year @ UCP last year

Cost last year
Cost Price Variance
= QSTY x UCPLY
= QSLY x UCPLY
Given:Formula:
1. Cost price variance ratio: CTY @ UCPTY
(1 Cost price variance ratio)
Cost Quantity Variance
Cost this year
Cost last
2. Cost quantity variance ratio: CLY @ UCPLY = x
year
(1 Sales
quantity variance
ratio)

Sample Problem #6:
Arabian Corporation
For the Years Ended, December 31, 2011 and 2012
2011
Sales
2,000,000
2012
P
2,340,000
Less: Variable Costs
1,400,000
1,911,000
Contribution Margin
600,000
429,000
Change + (-)
P
340,000
511,000
(171,000)
Solutions:
Sales this year
2,340,000
Less: STY @ USPLY

(P 2,340,000/90%)
2,600,000
(260,000) U
Sales Quantity Variance

STY @ USPLY
2,600,000
Less: Sales last year
2,000,000
600,000 F
Cost Price Variance

Cost this year
1,911,000
Less: CTY @ UCPLY

(P 1,400,000/130%)
1,820,000
91,000 U
Cost Quantity Variance

CTY @ UCPLY
1,820,000
Less: Cost last year
1,400,000
Gross Profit Variance
420,000 U
P
171,000 U
1) STY @ USPLY = P 2,340,000 / 90%

2) Sales Quantity Variation Ratio =
=
=
SQV/SLY
P 600,000/P 2,000,000
30% F (Increase)
3) CTY @ UCPLY = CLY x 130%

= P 1,820,000
CQV
= P 1,820,000 P 1,400,000
= P 420,000
CPV
= P 1,911,000 P 1,820,000
= P
91,000
Cost Price Variance Ratio =
=
=
CPV/CTY@UCPLY
P 91,000 / P 1,820,000
5% (increased)
4) Sales Price Variation Ratio
= SPV / STY @ USPLY
= P 260,000 / P 2,600,000 = 10%

(Decrease)
5)
VARIATION RATIOS
FORMULAS
a.Sales
price variation ratio
Sales price variance / STY @ USPLY
b.Sales
quantity variation ratio
Sales quantity variation / SLY
c.Cost
price variance ratio
Cost price variation / CTY @ UCLY
d.Cost
quantity variation ratio
Cost quantity variation / CLY
Multiproduct Gross Profit Variation

Sales price variation = USP x QSTY
Cost price variation
= UCP x QSTY
Sales mix variance
xx
xx
Gross profit (GP) this year @ UGP last year
xx
Less: GP this year @ Average unit GP last year
xx
Sales mix variance
xx
Sales yield variance (Final sales volume variance):

Gross profit this year @ Average unit GP last year
Less: GP last year
xx
xx
Sales yield variance

Net Gross Profit Variance
xx
P
xx
Multiproduct Gross Profit Variation

Sample Problem #7
Android VII Corp. sells three products Mapayat, Mataba, and Medyolang.
The sales, cost of goods sold, and gross profit of the three products in 2011
and 2012 are given below.
2011
Sales :
Mapayat (8,000u x P8) = P
64,000
(20,000u x P6)
Mataba(26,000u x P4) = 104,000
(22,000u x P5)
Medyolang (12,000u x P10) =
120,000
(13,000u x P12)
288,000
Costs :
Mapayat (8,000u x P8) =
40,000
(20,000u x P4)
Mataba
(26,000u x P4)
=
52,000
(20,000u x P4)
Medyolang(12,000u x P10) = 72,000
(20,000u x P6)
164,000
Gross Profit (46,000 x P2.69565) 124,000 (55,000u x P2.32727)
*Only slides 1-11 are

included

Sales Variances:
QSTY x USPTY = Sales this year
QSTY x USPLY = Applied Sales this year
QSLY x USPLY = Sales last year

Sales Quantity
Variance
Sum of
Sales
Variance
Variable Costs Variances:

QSTY x UVCTY = Sales this year
QSTY x UVCLY = Applied Sales this year
QSLY x UVCLY = Sales last year
Net Contribution Margin Variance
Variable Cost Price Variance

Variable Cost Quantity Variance
Sum of
Variable Cost
Variance

Contibution Margin

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What is contribution margin variance analysis?

What is contribution margin variance analysis?

What are the different types of variances in contribution margin variance analysis?

What are the different types of variances in contribution margin variance analysis?

PRODUCT PRICING AND

GROSS PROFIT VARIANCE

Contribution Margin Variance Analysis

Less: Variable Costs

Contribution Margin Variance Analysis

Sales Quantity Variance (400u x P 24)

Variable Cost Variances:

Gross Profit Variance Analysis

Sales Price Variance

USPTY Unit Sales this year

QSLY Quantity Sold last year

USPLY Unit Sales last year

Gross Profit Variance Analysis

2. Sales quantity variance ratio: STY @ USPLY=

Sales this year

Gross Profit Variance Analysis

Cost this year @ UCP last year

Cost Price Variance

Cost Quantity Variance

Cost this year

Gross Profit Variance Analysis

Less: Variable Costs

Less: STY @ USPLY

Sales Quantity Variance

Less: Sales last year

Cost Price Variance

Less: CTY @ UCPLY

Cost Quantity Variance

Less: Cost last year

Gross Profit Variance

1) STY @ USPLY = P 2,340,000 / 90%

3) CTY @ UCPLY = CLY x 130%

4) Sales Price Variation Ratio

= SPV / STY @ USPLY

= P 260,000 / P 2,600,000 = 10%

price variation ratio

Sales price variance / STY @ USPLY

quantity variation ratio

Sales quantity variation / SLY

price variance ratio

Cost price variation / CTY @ UCLY

quantity variation ratio

Cost quantity variation / CLY

Multiproduct Gross Profit Variation

Sales mix variance

Gross profit (GP) this year @ UGP last year

Less: GP this year @ Average unit GP last year

Sales mix variance

Sales yield variance (Final sales volume variance):

Sales yield variance

Multiproduct Gross Profit Variation

*Only slides 1-11 are

Contribution Margin Variance Analysis

Sales Price Variance

Variable Costs Variances: