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ACCA Applied Skills · Performance Management · Sales mix and quantity variances

Gamma Co budgets sales of C 500 units (standard profit $4), D 300 units (standard profit $10) and E 200 units (standard profit $15). Actual sales were C 700, D 300 and E 200 units. What is the total sales mix variance?

The total sales mix variance is $800 adverse. Actual sales of 1,200 units at the budget mix would be C 600, D 360 and E 240. Extra low-profit C earns $400, but shortfalls in D and E lose $600 each, so the net effect is $800 adverse.

  1. A$800 adverseCorrect
  2. B$800 favourable
  3. C$1,600 favourable
  4. D$600 adverse

Explanation

Actual total is 1,200 units. At the budget mix (50:30:20) this is C 600, D 360, E 240. C: +100 × $4 = $400 F; D: -60 × $10 = $600 A; E: -40 × $15 = $600 A; net $800 A. Check: budget average profit $8; actual average at standard is $7.33; difference × 1,200 = $800 A. The $1,600 F is the quantity variance.

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