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Shaghai Tea Products has an exclusive contract with British Distributors. Calamine and Shanghai are two brands...

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Accounting

Shaghai Tea Products has an exclusive contract with BritishDistributors. Calamine and Shanghai are two brands of teas that areimported and sold to retail outlets. The following information isprovided for the month of March: Actual Budget Calamine ShanghaiCalamine Shanghai Sales in pounds 3,400 lbs. 3,600 lbs. 4,000 lbs.3,000 lbs Price per pound $2.50 $2.50 $2.00 $3.00 Variable cost perpound 1.00 2.00 1.00 1.50 Contribution margin $1.50 $0.50 $1.00$1.50 Budgeted and actual fixed corporate-sustaining costs are$1,750 and $2,000, respectively. For the contribution margin, whatis the total flexible-budget variance? $300 favorable $1,900unfavorable $500 favorable $800 unfavorable

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3.9 Ratings (761 Votes)

Flexible budget variance = $     1,900 Unfavourable
Workings:
Actual Budget
Calamine Sanghai Calamine Sanghai
Sales in pounds (lbs)         3,400         3,600         4,000         3,000
contribution margin $       1.50 $       0.50 $       1.00 $       1.50
Actual contribution margin = (3,400 X $1.5) + (3,600 X $0.5)
= $     6,900
Contribution margin for flexible budget = (3,400 X $1) + (3,600 X $1.5)
= $     8,800
Flexible budget variance = Actual contribution margin - Contribution margin for flexible budget
= $6,900 - $8,800
= $     1,900 Unfavourable

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