Copyright © 2003 Pearson Education Canada Inc. Slide Chapter 16 Revenues, Sales Variances, and Customer Profitability Analysis
Copyright © 2003 Pearson Education Canada Inc. Slide Revenue Allocation Revenue allocation occurs when revenues, related but not traceable to individual products (services or customers), are assigned to individual products a Bundled product is a package of two or more products or services, sold for a single price, each with their own stand-alone prices Often called suite sales Allocate revenues to products based on selling prices or unit costs physical units stand-alone product revenues incremental revenues Pages
Copyright © 2003 Pearson Education Canada Inc. Slide Revenue Allocation – Stand Alone WordMaster $250 SpreadMaster $300 FinanceMaster $450 Suite price for all three products = $760 Allocation based on Stand-Alone Prices WordMaster$250 / $1,000 x $760 = $190 SpreadMaster$300 / $1,000 x $760 = 228 FinanceMaster $450 / $1,000 x $760 = 342 $760 Pages
Copyright © 2003 Pearson Education Canada Inc. Slide Revenue Allocation - Incremental WordMaster $250 SpreadMaster $300 FinanceMaster $450 Suite price for all three products = $760 Allocation based on Incremental Prices * FinanceMaster $450 SpreadMaster 300 FinanceMaster ($760 - $450 - $300) 10 $760 Pages * Assume primary product is Finance, then Spread, then Word
Copyright © 2003 Pearson Education Canada Inc. Slide Sales Volume Variance Static Budget Variance Pages Flexible Budget VarianceSales Volume Variance Market Size Variance Market Share Variance Sales Volume Variance = (actual unit sales - budgeted unit sales) x budgeted contribution margin per unit Sales Mix Variance Sales Quantity Variance
Copyright © 2003 Pearson Education Canada Inc. Slide Sales-Mix and Sales-Quantity Variances Sales-mix variance ActualActualBudgetedBudgeted = units of allx sales-salesxcontribution products soldmix %mix %margin per unit Sales-quantity variance ActualBudgetedBudgetedBudgeted =units of all-units of allxsalesxcontribution products soldproducts soldmix %margin per unit Pages
Copyright © 2003 Pearson Education Canada Inc. Slide Market-Share and Market-Size Variances Market-share variance ActualActualBudgetedBudgeted average = market sizexmarket-marketxcontribution in unitsshare %share %margin per unit Market-size variance ActualBudgetedBudgetedBudgeted average = market size-market sizexmarketxcontribution in unitsin unitsshare %margin per unit Pages
Copyright © 2003 Pearson Education Canada Inc. Slide Customer Profitability Analysis Consider profitability of individual customers taking into account: customer specific costs distribution channel costs customer support costs corporate sustaining costs Look at customers in terms of short-run and long-run profitability likelihood of retention growth potential increases in overall demand from well-known customers ability to learn from a customer Pages
Copyright © 2003 Pearson Education Canada Inc. Slide Mix and Yield Variances for Inputs Pages Mix variance ActualBudgetedActual totalBudgeted = input-inputxinputsxprice per mix %mix %usedinput unit Yield variance Actual totalBudgeted totalBudgetedBudgeted = units of-units ofxinputxprice per input usedinputs usedmix %input unit
Copyright © 2003 Pearson Education Canada Inc. Slide Mix and Yield Variances Static Budget Variance Pages Flexible Budget VarianceSales Volume Variance Mix Variance Yield Variance Price Variance Efficiency Variance