Diane’s Designs is a small business run out of its owner’s house. For the past 6 months, the company has been selling two products, a welcome sign and a birdhouse. The owner has been concerned about the company’s marketing effectiveness. The master budget and actual results for March of this year follow: Master Budget Welcome Sign Birdhouse Total Units 50 25 75 Sales $ 1,000 $ 250 $ 1,250 Variable costs 890 120 1,010 Contribution margin $ 110 $ 130 $ 240 Fixed costs 75 75 150 Operating income $ 35 $ 55 $ 90 Actual Results Welcome Sign Birdhouse Total Units 45 35 80 Sales $ 675 $ 420 $ 1,095 Variable costs 580 270 850 Contribution margin $ 95 $ 150 $ 245 Fixed costs 75 75 150 Operating income $ 20 $ 75 $ 95 The total market for welcome signs for each of the last 6 months was 500 budgeted and 500 actual. Diane expected the total market for birdhouses to be 200 units per month; the actual volume for the entire market, however, turned out to be only 175 units per month. Required: 1. Compute Diane’s actual market share for welcome signs and birdhouses. 2. What is the market share contribution margin variance? (Leave no cell blank; if there is no effect enter "0" and select "None" from dropdown. Do not round intermediate calculations. Round your answers to 2 decimal places.) 3. What is the market size contribution margin variance? (Leave no cell blank; if there is no effect enter "0" and select "None" from dropdown. Do not round intermediate calculations. Round your answers to 2 decimal places.)
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Diane’s Designs is a small business run out of its owner’s house. For the past 6 months, the company has been selling two products, a welcome sign and a birdhouse. The owner has been concerned about the company’s marketing effectiveness. The
| Master Budget | |||||||||||
| Welcome Sign | Birdhouse | Total | |||||||||
| Units | 50 | 25 | 75 | ||||||||
| Sales | $ | 1,000 | $ | 250 | $ | 1,250 | |||||
| Variable costs | 890 | 120 | 1,010 | ||||||||
| Contribution margin | $ | 110 | $ | 130 | $ | 240 | |||||
| Fixed costs | 75 | 75 | 150 | ||||||||
| Operating income | $ | 35 | $ | 55 | $ | 90 | |||||
| Actual Results | |||||||||||
| Welcome Sign | Birdhouse | Total | |||||||||
| Units | 45 | 35 | 80 | ||||||||
| Sales | $ | 675 | $ | 420 | $ | 1,095 | |||||
| Variable costs | 580 | 270 | 850 | ||||||||
| Contribution margin | $ | 95 | $ | 150 | $ | 245 | |||||
| Fixed costs | 75 | 75 | 150 | ||||||||
| Operating income | $ | 20 | $ | 75 | $ | 95 | |||||
The total market for welcome signs for each of the last 6 months was 500 budgeted and 500 actual. Diane expected the total market for birdhouses to be 200 units per month; the actual volume for the entire market, however, turned out to be only 175 units per month.
1. Compute Diane’s actual market share for welcome signs and birdhouses.
2. What is the market share contribution margin variance? (Leave no cell blank; if there is no effect enter "0" and select "None" from dropdown. Do not round intermediate calculations. Round your answers to 2 decimal places.)
3. What is the market size contribution margin variance? (Leave no cell blank; if there is no effect enter "0" and select "None" from dropdown. Do not round intermediate calculations. Round your answers to 2 decimal places.)
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