Exercise 1422
Given:
Figure Four is a distributor of pharmaceutical products. Its ABC system has 5 activities.
Rick Flair, the controller of Figure Four, wants to use this ABC system to examine individual
customer profitability within each distribution market. He focuses first on the Ma and Pa
singlestore distribution market. Two customers are used to exemplify the insights available
with the ABC approach. Data pertaining to these two customers in August 2012 are as
follows:
the basis of monthly operating income. The cumulative operating income of the top 20%
of customers is $55,680. Figure Four reports negative operating income of $21,247 for the
bottom 40% of its customers.
Make four recommendations that you think Figure Four should consider
in light of this new customerprofitability information.
Exercise 1425 Variance analysis, multiple products — sales variances 

Given: 

SodaKing manufactures and sells 3 soft drinks: Kola, Limor, and Orlem. Budgeted and 

actual results for 2011 are as follows: 


Budget Information for 2011 


Actual Information for 2011 


Selling Price 
Variable Cost 
Cartons 
Selling Price 
Variable Cost 
Cartons 

Product 
per Carton 
per Carton 
Sold 
per Carton 
per Carton 
Sold 

Kola 
$8.00 
$5.00 
480,000 
$8.20 
$5.50 
467,500 

Limor 
$6.00 
$3.80 
720,000 
$5.75 
$3.75 
852,500 

Orlem 
$7.50 
$5.50 
1,200,000 
$7.80 
$5.60 
1,430,000 

1. Use the post method to calculate the individual product and total product variances 

requested below. Calculate all variances in terms of contribution margin. 

a. Compute the salesprice variance for August 2011. 

b. Compute the salesmix variance for August 2011. 

c. Compute the salesquantity variance for August 2011. 

d. Compute the salesvolume variance for August 2011. 



2. What inferences can you draw from the variances computed in requirement #1? 




Exercise 1426 Marketshare and marketsize variances (continuation of 1425). 




Given: 


SodaKing prepared the budget for 2011 assuming a 12% market share based on total sales 


in the western region of the United States. The total soft drinks market was estimated to reach 


sales of 20 million cartons in the region. However, actual total sales volume in the western 


region was 27.5 million cartons. Calculate the marketshare and marketsize variances for Soda 


King in 2011. Calculate all variances in terms of contribution margin. Use the post method. 



