SPV = (Actual SP per Unit –

Budgeted SP per Unit) x

Actual No. of Units Sold
SVV = (No. of Units Sold –
No. of Units in Master Budget )x
Budgeted CM per Unit
SMV = (Actual Sales Mix Percentage for the Product –
Budgeted Sales Mix Percentage for the Product ) x
Actual Total Units of all products sold x
Budgeted unit CM of the product
SQV = (Actual Total Units of All Products Sold –
Budgeted Total Units of All Products Sold) x
Budgeted Sales Mix Percentage of the product x
Budgeted CM per unit of the product
MSV = (Actual Total Units of the Market –
Budgeted Total Units of the Market) x
Budgeted Market Share x
Weighted-average Budgeted CM per unit
MSV = (Actual Market Share –
Budgeted Market Share) x
Actual Total Units of the Industry x
Weighted-average Budgeted CM per unit
 Budgeted Data for 2019 Actual Operating Results in 2019
Selling Variable Selling Variable
Flavor
Flavor Pieces Price per Costs per Pieces Price per Costs per
Piece Piece Piece Piece
Vanilla 250,000 P 120 P 50 180,000 P 100 P 45

Chocolate 300,000 150 60 270,000 135 50

Strawberry 200,000 180 70 330,000 200 75

Mango 50,000 250 100 180,000 300 120

1. Compute for the individual flavors and total sold:

a) Sales Volume Variances
b) Sales Mix Variances
c) Sales Quantity Variances
2. Assess the operation of 2019 based on your analyses
 Budget Actual

Flavor
Flavor
Quantity Mix Quantity Mix
Vanilla 250,000 0.3125 180,000 0.18750
Chocolate 300,000 0.3750 270,000 0.28125
Strawberry 200,000 0.2500 330,000 0.34375
Mango 50,000 0.0625 180,000 0.18750
TOTAL 800,000 1.0000 960,000 1.00000
 Sales Quantity

Flavor Actual Budget Difference Budgeted Sales Volume

CM/Unit Variance
Vanilla 180,000 250,000 70,000 U P 70.00 P (4,900,000) U

Chocolate 270,000 300,000 30,000 U P 90.00 (2,700,000) U

Strawberry 330,000 200,000 130,000 F P 110.00 14,300,000 F

Mango 180,000 50,000 130,000 F P 150.00 19,500,000 F

TOTAL 960,000 800,000 P26,200,000 F

 Sales Mix

Flavor Actual Budget Difference Total Actual Budgeted Sales Volume

Flavor Quantity CM/Unit Variance

Vanilla 0.18750 0.3125 0.12500 U 960,000 P 70.00 P(8,400,000) U

Chocolate 0.28125 0.3750 0.09375 U 960,000 P 90.00 P(8,100,000) U

Strawberry 0.34375 0.2500 0.09375 F 960,000 P 110.00 P 9,900,000 F

Mango 0.18750 0.0625 0.12500 F 960,000 P 150.00 P 18,000,000 F

TOTAL 1.00000 1.0000 P 11,400,000 F

 Total Sales Quantity

Flavor Actual Budget Difference Budgeted Budgeted Sales Quantity

Flavor Sales Mix CM/Unit Variance

Vanilla 960,000 800,000 160,000 0.3125 P 70.00 P 3,500,000 F

Chocolate 960,000 800,000 160,000 0.3750 P 90.00 P 5,400,000 F

Strawberry 960,000 800,000 160,000 0.2500 P 110.00 P 4,400,000 F

Mango 960,000 800,000 160,000 0.0625 P 150.00 P 1,500,000 F

TOTAL 1.0000 P 14,800,000 F

 SALES SALES SALES
FLAVOR MIX QUANTITY VOLUME
VARIANCE VARIANCE VARIANCE
Vanilla P(8,400,000) U P 3,500,000 F P (4,900,000) U

Chocolate P(8,100,000) U P 5,400,000 F (2,700,000) U

Strawberry P 9,900,000 F P 4,400,000 F 14,300,000 F

Mango P 18,000,000 F P 1,500,000 F 19,500,000 F

TOTAL P 11,400,000 F P 14,800,000 F P26,200,000 F
Overall, the firm has enjoyed a good year. The total
sales substantially exceeds the budgeted amount
(20%). The increase in sales could have been a result
of the increase of the entire market size for gelatin and
other competing merchandises. In any event, the firm
still had an excellent operation by selling more units of
the flavors with high contribution margin. The favorable
sales mix variances in two of the flavors suggest that
the two flavors with high contribution margins account
for all the increases in sales.
MBR Company produces and sells gold-plated souvenir mugs.
It expects to sell 1,600 units in 2019 for P45 each to earn a P25
contribution margin per unit. The president expects the total
market to be 32,000 units for the year.

In 2019, the University of the West won the national basketball

championship. MBR sold 3,000 at P75 per unit with P40 in
variable costs per unit. Total market was 100,000 units.

Required: For MBR:

1. What is the market share variance?
2. What is the market size variance?
3. What is the sales volume variance?
Market Share:
Actual: 3,000/100,000 = 3%
Budget: 1,600/32,000 = 5%

Market Share Variance = (3% - 5%)(100,000)(P25)

= P (50,000) Unfavorable
Market Size Variance = (100,000 – 32,000)(0.05)(P25)
= P 85,000 Favorable

Sales Volume Variance = (3,000 – 1,600)(P25)

= P 35,000 Favorable
Market Share Variance P 50,000 Unfavorable
Market Size Variance 85,000 Favorable
Sales Volume Variance P 35,000 Favorable
CHAPTER 25
 To motivate managers to exert a high level of effort
to achieve the goals set by top management.
 To provide the incentive for managers, acting
autonomously, to make decisions consistent with
the goals set by top management.
 To determine fairly the rewards earned by managers
for their effort and skill and the effectiveness of
their decision making.
 Average annual cash and stock compensation
based on long-run performance equal to 57% of
current salary, and
 Bonuses based on short-run performance equal to
40% of current salary.

These percentages vary widely over the sample;

some firms use stronger performance incentives
than others.
 Postponing needed maintenance, or

 Postponing revenue recognition at the end of

the year in which maximum bonus has already
been achieved to the next year.
 Achievement of organization goals,

 Ease of administering the plans, and

 Ensuring that affected executives perceive the

plan.