Exam 16: Operational Performance Measurement: Further Analysis of Productivity and Sales

Winston Co. had two products code named X and Y. The firm had the following budget for August: Product X Product Y Total Sales \ 286,000 \ 520,000 \ 806,000 Variable Costs 189,800 218,400 408,200 Contribution Margin \ 96,200 \ 301,600 \ 397,800 Fixed costs 50,000 108,000 158,000 Operating Income \4 6,200 \1 93,600 \2 39,800 Selling Price per unit \1 10.00 \5 0.00 $\text { On September 1, the following actual operating results for August were reported: }$ Product X Product Y Total Sales \ 360,000 \ 540,000 \ 900,000 Variable Costs 195,000 216,000 411,000 Contribution Margin \ 165,000 \ 324,000 \ 489,000 Fixed costs 50,000 108,000 158,000 Operating Income \1 15,00 \2 16,000 \3 31,000 Units Sold 3,000 9,000 Total industry volume for both products X and Y was estimated to be 130,000 units at the time of the budget. Actual industry volume for the period for products X and Y was 100,000 units. The contribution margin sales volume variance for Product Y is:

Gutsen Communications Inc. manufactures a scrambling device for cellular phones. The main component of the scrambling device is a very delicate part—DTV-12. DTV-12 requires careful handlings during manufacturing. Once damaged, the part must be discarded. Only skilled laborers are hired to manufacture and install DTV-12. Damages still occur, however. The following are the operating data of Gutsen Communications Inc. for 2018 and 2019 relative to the insertion of DTV-12. Round calculations to 2 significant digits. 2018 2019 Number of phones manufactured 600,000 780,000 Units of DTV-12 used 960,000 1,072,500 Direct labor hours for DTV-12 insertion 1,800 2,600 Total cost of DTV-12 units \ 1,443,750 \ 2,333,750 Direct labor wage rate per hour \6 7 \8 2 The partial direct labor financial productivity ratio for 2019 is:

Broha Company manufactured 1,500 units of its only product during 2019. The inputs for this production are as follows: 450 pounds of Material A at a cost of $1.50 per pound 300 pounds of Material H at a cost of $2.75 per pound 300 direct labor hours at $20 per hour The firm manufactured 1,800 units of the same product in 2018 with the following inputs: 500 pounds of Material A at a cost of $1.20 per pound 360 pounds of Material H at a cost of $2.50 per pound 400 direct labor hours at $18 per hour Round all calculations to 2 significant digits. In 2018, the partial financial productivity of direct labor is:

Duo, Inc., carries two products and has the following year-end income statement (000s omitted):The net effect of ZR-7's selling price variance on profit is:

The market share variance measures the effect of the difference in market shares on the firm's total contribution margin and:

Nappon Co. has two products named X and Y. The firm had the following master budget for the year just completed: $\begin{array}{lrrr} & \text { Product X } & \text { Product Y } & \text { Total } \\\text { Sales } & \$ 260,000 & \$ 360,000 & \$ 620,000 \\\text { Variable Costs } & 156.000 & 180,000 & 336,000\\\text { Contribution Margin } & \$ 104,000 & \$ 180,000 & \$ 284,000 \\\text { Fixed costs } & 130,000 & 108,000 & 238,000\\\text { Operating Income (Loss) }&\$(26,000)&\$72,000&\$46,000\\\text { Selling Price per unit }&\$130.00&\$60.00\end{array}$ $\text { The following actual operating results were reported after the year was over: }$ $\begin{array}{lrrr} & \text { Product X } & \text { Product Y } & \text { Total } \\\text { Sales } & \$ 202,500 & \$ 467,500 & \$ 670,000 \\\text { Variable Costs } & 117.000 & 212,500 & 329,500\\\text { Contribution Margin } & \$ 85,500 & \$ 255,000 & \$ 340,500 \\\text { Fixed costs } & 140,000 & 108,000 & 248,000\\\text { Operating Income (Loss) } & \$(54,500) & \$ 147,000 & \$ 92,500\\\text { Units Sold } & 1,500 & 8,500\end{array}$ The sales quantity variance for Product X is:

Showtime is a group of aspiring musicians and actors who perform in theaters and dinner clubs.It has a matinee and evening show.These operating data pertain to the month of July: Required: 1.Calculate for each type of show and the total: a.Sales mix variances. b.Sales quantity variances. c.Sales volume variances. 2.What strategic implications can you draw from the variances?

The two major contributing factors to a sales volume variance are deviations in:

Gutsen Communications Inc. manufactures a scrambling device for cellular phones. The main component of the scrambling device is a very delicate part—DTV-12. DTV-12 requires careful handlings during manufacturing. Once damaged, the part must be discarded. Only skilled laborers are hired to manufacture and install DTV-12. Damages still occur, however. The following are the operating data of Gutsen Communications Inc. for 2018 and 2019 relative to the insertion of DTV-12. Round calculations to nearest whole number. 2018 2019 Number of phones manufactured 600,000 780,000 Units of DTV-12 used 960,000 1,072,500 Direct labor hours for DTV-12 insertion 1,800 2,600 Total cost of DTV-12 units \ 1,443,750 \ 2,333,750 Direct labor wage rate per hour \6 7 \8 2 The partial direct labor operational productivity ratio for 2019 is:

Julie Hilger started New Treads to combine fashion and sustainability. The original production of sandals made from recycled plastic has expanded to a complete line of casual footwear. Current sales total over $2 million. Julie hired the firm's first controller early this year, and has asked him to detail suggestions for ways to increase profits. Adrian Warring, the new controller, has compiled a list of recommended changes that focus on quality improvements. New Treads customers expect high quality at a low price, a "value" product. So the company must simultaneously watch costs and quality. After receiving his list of suggestions, Julie calls Adrian to her office and says, "I don't see how improving quality can increase productivity. In fact, it seems to me that efforts to improve quality will slow down production and decrease productivity." Required: Using specific examples, help Adrian explain to Julie why efforts to improve quality can also boost productivity. How does productivity play a role in the firm's strategy and competitive environment?

Wheat Inc. has an exclusive contract with an exporter. Two brands of wheat are imported, labeled AB and CD. The following data are provided for the current fiscal year:The total market was estimated to 40,000 bushels at the time of budget. The actual total market for the year is 32,000 bushels. What is CD's contribution margin sales volume variance?

Wheat Inc. has an exclusive contract with an exporter. Two brands of wheat are imported, labeled AB and CD. The following data are provided for the current fiscal year: The total market was estimated to 40,000 bushels at the time of budget. The actual total market for the year is 32,000 bushels. What is the firm's market size variance?

TV Timers, Inc., manufactures time control devices for TV's. The firm has the following operating data for its operations in July: Actual market size 10,000 Budgeted market size 11,250 Actual market share 34\% Budgeted market share 32\% Budgeted average contribution margin \6 Actual average contribution margin \5 .25 What is the company's market size variance?

Which of the following is a total productivity measure?

Triple Delight is a food stand located on a busy corner in the local business district.On average it sells three cheeseburgers and one fishwich for every four hamburgers sold.The following data were culled from its operation for 2019: The estimated total volume for the food stands in the region was 2,500,000 units.Consistent good weather pushed the total volume for the year to 4,000,000. Required: Determine the following: 1.Budgeted weighted-average contribution margin. 2.Budgeted and actual market shares. 3.Budget and actual total units sold. 4.Sales quantity variances for fishwich. 5.Budgeted contribution margin of each product. 6.Actual sales mix of each product. 7.Budget and actual units sold for each product.

The experience of many firms is that decreases in labor costs may:

Gutsen Communications Inc. manufactures a scrambling device for cellular phones. The main component of the scrambling device is a very delicate part—DTV-12. DTV-12 requires careful handlings during manufacturing. Once damaged, the part must be discarded. Only skilled laborers are hired to manufacture and install DTV-12. Damages still occur, however. The following are the operating data of Gutsen Communications Inc. for 2018 and 2019 relative to the insertion of DTV-12. Round calculations to 2 significant digits. 2018 2019 Number of phones manufactured 600,000 780,000 Units of DTV-12 used 960,000 1,072,500 Direct labor hours for DTV-12 insertion 1,800 2,600 Total cost of DTV-12 units \ 1,443,750 \ 2,333,750 Direct labor wage rate per hour \6 7 \8 2 The partial operational productivity ratio of DTV-12 in 2019 is:

Broha Company manufactured 1,500 units of its only product during 2019. The inputs for this production are as follows: 450 pounds of Material A at a cost of $1.50 per pound 300 pounds of Material H at a cost of $2.75 per pound 300 direct labor hours at $20 per hour The firm manufactured 1,800 units of the same product in 2018 with the following inputs: 500 pounds of Material A at a cost of $1.20 per pound 360 pounds of Material H at a cost of $2.50 per pound 400 direct labor hours at $18 per hour Round all calculations to 2 significant digits. The total productivity ratio in 2019 is:

Jackson, Inc., manufactures two products that it sells to the same market. Excerpted below are its budgeted and actual operating results for the year just completed:Industry volume was estimated to be 1,875,000 units at the time the budget was prepared. Actual industry volume for the period was 2,440,000 units. Jackson measures variances using contribution margin. The market share variance is:

Gourmet Aroma Coffee House has an exclusive contract with Columbia exporters. Two brands of gourmet coffee are imported, Morning Thunder (MT) and Evening Tender (ET). The following data are provided for the current fiscal year:The total market was estimated to be 80,000 pounds at the time of budget. The actual total market for the year is 75,000 pounds. What is MT's sales quantity variance?