(Appendix 11A)Yukon Company Expressed the Total Expenses (Y)component of Its

(Appendix 11A)Yukon Company expressed the total expenses (Y)component of its master budget for March with the cost formula Y = $100,000 + $40*X,where X represents the expected number of units of its only product to be manufactured and sold.The budgeted average selling price per unit was $65 for budgeted sales volume 5,000 units based on an estimated industry volume of 50,000 units.Reported actual results for February were as follows:

$\begin{array} { l r } \text { Sales } & \underline { 5,400 \text { units* } } \\\text { Sales revenue } & \$ 324,000 \\\text { Less variable costs } & \underline { 194.400 } \\\text { Contribution margin } & \$ 129,600 \\\text { Less fixed expenses } & \underline { 102.000 } \\\text { Operating income } & \$ 27.600 \\\end{array}$

*Actual industry sales volume was 60,000 units.

Required:

a) Calculate the flexible budget variance and analyze it into sales price variance and cost/expense variance(s).
b) Calculate the sales volume variance and analyze it into market-size (industry volume) variance and market-share variance.
c) On the basis of your analysis in parts (a) and (b), would you recommend a bonus be paid to the sales manager? Why or why not?

Correct Answer:

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a) Flexible budget variance
Per unit amo...

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