Peninsula Candy Company makes three types of candy bars Chew

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) 1,600 bars 1,600 bars 3,200 bars 6,400 bars
Sales-dollars (in thousands) $ 176 $ 256 $ 768 $ 1,200
Variable costs 136 200 672 1,008
Contribution margin $ 40 $ 56 $ 96 $ 192
Manufacturing fixed cost 30 37 56 123
Product margin $ 10 $ 19 $ 40 $ 69
Marketing and administrative costs (all fixed) 45
Operating profit $ 24
Actual
Sales-units (in thousands) 1,200 bars 1,600 bars 3,300 bars 6,100 bars
Sales-dollars (in thousands) $ 84 $ 256 $ 768 $ 1,108
Variable costs 53 214 667 934
Contribution margin $ 31 $ 42 $ 101 $ 174
Manufacturing fixed cost 28 37 56 121
Product margin $ 3 $ 5 $ 45 $ 53
Marketing and administrative costs (all fixed) 41
Operating profit $ 12

Industry volume was estimated at 96.0 million bars for budgeting purposes. Actual industry volume for July was 89.4 million bars.

Required:

Break down the total activity variance into sales mix and quantity parts. (Do not round intermediate calculations. Indicate the effect of each variance by selecting \"F\" for favorable, or \"U\" for unfavorable. If there is no effect, do not select either option.)

Question 5 [of 5 chaor yeare produ y ng he co pan ; pnor ynar market sh e ad ste tor plann d char es Peni JA Candy ompany m kns t me t es o o dy bars: A Chunk and ho o Lite LIn S RS nlume the annual bi d at bs d nmined hy·stmating the otal mark t volume 1nr can y bars and thn due to company programe for the corning year. Volume is apporioned among the three bare baeed on the prior years product mix, again adjueted for planned changee for the coming year The folowing are the company budget and the resulte of operatons for July Chnky Chile 3.200 rs ??8kos-unity (in thtsus.nde) 1800 wr8 1,800 bars 8.400 b Vrlablo costs Contributicn margn Vanufscturing fixed wt Marketing and admiristrative coats (all toed) Opurwting pruft S 24 1200 bars S 84 Sales-unis in thousands) 1,000 bars 3,300 bars 8.100 bars Contibuticn margn Manufacturing fixed ot Marketing and admiristratve costs (all xed) Operating profr S 12 Industry volume was est mated at 95.0 milion bars for budgetng purpos88. Actuel industry volume for July ws 894 milion bers Break cown the satal aity vrianca ima sales mix and quanbty parts.Do not mik and quantty round intermediate cal culabions. Indicate the effect af each variance by sclecting \"F\" for favorable, or \"U\" for unfavorable. If there is no effect, do not select either option.

Solution

Sales mix variance Particulars Chewy Chinky Choco Actual quantity sold (A) 1200 1600 3300 Standard quan sold in standard mix (B) =1600 * 6100 /6400 =1600 * 6100 /6400 =3200 * 6100 /6400 1525 1525 3050 Standard profit per unit (C) 10 19 40 (Actual quant Sold- Standard Quant Sold ) * Standard profit per unit Sales mix varaince = (A-B) X C = (1200-1525) X 10 = (1600-1525) X 19 = (3300-3050) X 40 = 3250 U = 1425 F = 10000 F Sales quantity varaince Particulars Chewy Chinky Choco Standard quan sold in standard mix (A) 1525 1525 3050 Budgeted sales (B) 1600 1600 3200 Standard profit per unit (C) 10 19 40 Sales quantity varaince = (A-B) X C (Standard quantity - Budgeted Sales) Standard Profit per unit = (1525-1600) X 10 = (1525-1600) X 19 = (3050-3200) X 40 = 750 U = 1425 U = 6000 U Formula for activity variance = Sales mix + Sales quantity varaince Particulars Chewy Chinki Choco Activity variance 4000 U - 4000F