Reference no: EM132730612

Problem 1 - Market Share and Size Variance

AdiWear Company produces dry-fit t-shirt for joggers. Information pertaining to AdiWear's operations for May 2014 follows:

Actual Budget

Units sold 230.550 220.000

Sales revenue $ 3,412,140 $ 3,300,000

Variable cost ratio 68% 64%

Market size in units 4,350,000 4,400,000

a. Compute the sales volume variance for May 2014.

b. Compute the market-share and market-size variances for May 2014.

c. Comment on possible reasons for the variance you computed in requirement b.

Problem 2 - Breakdown Flexible Budget

Boehringer Ingelheim budgeted prices for direct materials, direct manufacturing labor, and direct marketing (distribution) labor per bottle are $40, $8, and $ 12, respectively. The president is pleased with the following performance report:

Actual Costs Static Budget Variance

Direct Materials $ 364,000 $ 400,000 $ 36,000 F

Direct Manufacturing Labor $ 78,000 $ 800,000 $ 722,000 F

Direct Marketing (distr) labor $ 110,000 $ 120,000 $ 10,000 F

Actual output was 8,800 bottle. Assume all three direct-cost items shown are variable costs. Is the president's pleasure justified? Revised performance report that uses a flexible budget and a static budget.