25 May Question 151. The Chair Company manufactures two modular types of chairs, one for the
Question
151. The Chair Company manufactures two modular types of chairs, one for the residential market, and the other for the office market. Budgeted and actual operating data for the year 20×3 are:
Static Budget Residential Office Total
Number of chairs sold 260,000 140,000 400,000
Contribution margin $26,000,000 $11,200,000 $37,200,000
Actual Results Residential Office Total
Number of chairs sold 248,400 165,600 414,000
Contribution margin $22,356,000 $13,248,000 $35,604,000
Prior to the beginning of the year, an office products research firm estimated the industry volume for residential and office chairs of the type sold by the Chair Company to be 2,400,000. Actual industry volume for the year 20×3 was only 2,200,000 chairs.
Required:
Compute the following variances in terms of contribution margin.
a. Compute the total static-budget variance, the total flexible-budget variance, and the total sales-volume variance.
b. Compute the sale-mix variance and the sales-quantity variance by type of chair, and in total.
c. Compute the market-share variance and market-size variance.
CRITICAL THINKING
152. A company might choose to allocate corporate costs to various divisions within the company for what four purposes? Give an example of each.
153. An electronics manufacturer is trying to encourage its engineers to design simpler products so that overall costs are reduced.
Required:
Which of the value-chain function costs (R&D, design, production, marketing, distribution, customer service) should be included in product-cost estimates to achieve the above purpose? Why?
154. List at least three different levels of costs in a customer-cost hierarchy and an example of each.
155. Why would a manager perform customer-profitability analysis?
156. Why would a manager want to calculate the sale-mix and the sales-quantity variances? Market-share and market-size
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