ACCA Applied Skills · Performance Management · Sales mix and quantity variances
Fargo Co budgeted to sell Alpha 800 units (standard profit $5 per unit) and Beta 200 units (standard profit $15 per unit). Actual sales were Alpha 900 units and Beta 100 units. Which pair of variances is correct?
Sales mix variance is $1,000 adverse and the sales quantity variance is nil. Total units sold equal budget, so there is no quantity effect. The shift towards low-profit Alpha and away from high-profit Beta reduces profit by $1,500 less $500 gained, a net $1,000 adverse.
- ASales mix $1,000 adverse; sales quantity nilCorrect
- BSales mix $1,000 favourable; sales quantity nil
- CSales mix $1,000 adverse; sales quantity $1,000 favourable
- DSales mix $500 favourable; sales quantity $1,500 adverse
Explanation
Total actual units (1,000) equal budget, so the quantity variance is nil. At the budget mix, Alpha would be 800 and Beta 200. Alpha: +100 × $5 = $500 F; Beta: -100 × $15 = $1,500 A; net mix variance $1,000 A, which equals the total profit variance (actual $6,000 vs budget $7,000).
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