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revenue analysis using industry data and multiple product lines peninsula candy comp 691406

Revenue Analysis Using Industry Data and Multiple Product Lines

Peninsula Candy Company makes three types of candy bars: Chewy, Chunky, and Choco Lite (Lite). Sales volume for the annual budget is determined by estimating the total market volume for candy bars and then applying the company’s prior year market share, adjusted for planned changes due to company programs for the coming year. Volume is apportioned among the three bars based on the prior year’s product mix, again adjusted for planned changes for the coming year.

The following are the company budget and the results of operations for July.

Budget

Chewy

Chunky

Choco Lite

Total

Sales units (in thousands)

2,000 bars

2,000 bars

4,000 bars

8,000 bars

Sales dollars (in thousands)

$200

$400

$600

$1,200

Variable costs

140

320

460

920

Contribution margin

$ 60

$ 80

$140

$ 280

Manufacturing fixed cost

40

40

60

140

Product margin

$ 20

$ 40

$ 80

$ 140

Marketing and administrative

       

costs (all fixed)

     

50

Operating profit

     

$ 90

Actual

       

Sales units (in thousands)

1,600 bars

2,000 bars

4,200 bars

7,800 bars

Sales dollars (in thousands)

$162

$400

$600

$1,162

Variable costs

112

322

464

898

Contribution margin

$ 50

$ 78

$136

$ 264

Manufacturing fixed cost

42

44

63

149

Product margin

$ 8

$ 34

$ 73

$ 115

Marketing and administrative

       

costs (all fixed)

     

55

Operating profit

     

$ 60

Industry volume was estimated at 80 million bars for budgeting purposes. Actual industry volume for July was 76 million bars.

Required

a. Prepare an analysis to show the effects of the sales price and sales activity variances.

b. Break down the sales activity variance into the parts caused by industry volume and market share.

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