(Appendices 11A and 11B)The Following Is a Summarized Master Budget

question 140

Essay

(Appendices 11A and 11B)The following is a summarized master budget that Moose Jaw Company prepared for February:

$\begin{array}{l}\begin{array}{lll}\text {Sales}\\\\\text {Sales revenue}\\\text {Less variable costs:}\\\text {Manufacturing}\\\text {Marketing}\\\text {Contribution margin}\\\text {Less fixed costs:}\\\text {Manufacturing}\\\text {Marketing}\\\text {Operating income}\\\end{array}\begin{array}{ccc}& 9.000 \text { units* } \\\\& \$ 450,000 \\\\\$ 270,000 & \\18,000 & 288,000\\&\$ 162,000\\\\\$ 72.000 & \\27.000 & 99.000\\&\$ 63.000\end{array}\end{array}$

*Based on estimated industry volume (market-size) of 180,000 units

Actual results for January were as follows:

$\begin{array}{l}\begin{array}{lll}\text {Industry volume } \\\text {Units produced and sold } \\\text {Selling price per unit } \\\text {Variable costs per unit: } \\\text {Manufacturing } \\\text {Marketing } \\\text {Fixed costs: } \\\text {Manufacturing } \\\text {Marketing } \\\end{array}\begin{array}{lll}140,000 \text { units } \\8,400 \text { units } \\\$ 55.00 \\\\\$ 32.00 \\\$ 1.50 \\\\\$ 72.000 \\\$ 27,000\end{array}\end{array}$

Required:

a) (Appendix 11A) Calculate the flexible budget variance and analyze it into sales price variance and cost/expense variance(s).
b) (Appendix 11A) Calculate the sales volume variance and analyze it into market-size (industry volume) variance and market-share variance.
c) (Appendix 11A) Assume that the marketing manager has direct influence in setting selling prices. On the basis of your analysis in part (b), would you conclude recommend a bonus be paid to the sales manager? Why or why not?
d) How successful was the marketing manager in controlling the cost of the marketing activity? Explain.

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Definitions:

Divestiture

Getting rid of a business unit. The reverse of an acquisition.

High Debt

A situation where an individual or organization carries a heavy financial obligation, often measured relative to income or assets, which can lead to increased risk and financial strain.

Proxy Fight

A fight for control of a corporation when two or more interests compete for the proxies of shareholders in the election of directors.

Shareholders

Individuals or institutions that own share(s) in a corporation, thereby having a claim on its profits and assets.