Reference no: EM131791929
Question - Variance analysis, multiple products
The Detroit Penguins play in the American Ice Hockey League. The Penguins play in the Downtown Arena ( owned and managed by the City of Detroit), which has a capacity of 15,000 seats ( 5,000 lower- tier seats and 10,000 upper- tier seats). The Downtown Arena charges the Penguins a per- ticket charge for use of its facility. All tickets are sold by the Reservation Network, which charges the Penguins a reservation fee per ticket. The Penguins' budgeted contribution margin for each type of ticket in 2012 is computed as follows:
Lower- Tier Tickets Upper- Tier Tickets
Selling price $ 35 $ 14
Downtown Arena fee 10 6
Reservation Network fee 5 3
Contribution margin per ticket $ 20 $ 5
The budgeted and actual average attendance figures per game in the 2012 season are as follows:
Budgeted Seats Sold Actual Seats Sold
Lower tier 4,000 3,300
Upper tier 6,000 7,700
Total 10,000 11,000
There was no difference between the budgeted and actual contribution margin for lower- tier or upper-tier seats. The manager of the Penguins was delighted that actual attendance was 10% above budgeted attendance per game, especially given the depressed state of the local economy in the past six months.
1. Compute the sales- volume variance for each type of ticket and in total for the Detroit Penguins in 2012. Required (Calculate all variances in terms of contribution margins.)
2. Compute the sales- quantity and sales- mix variances for each type of ticket and in total in 2012.
3. Present a summary of the variances in requirements 1 and 2. Comment on the results.