1. Copyright © 2003 Pearson Education Canada Inc. Slide 16-168 Chapter 16 Revenues, Sales Variances, and Customer Profitability Analysis

2. Copyright © 2003 Pearson Education Canada Inc. Slide 16-169 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 599 - 600

3. Copyright © 2003 Pearson Education Canada Inc. Slide 16-170 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 600 - 601

4. Copyright © 2003 Pearson Education Canada Inc. Slide 16-171 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 600 - 601 * Assume primary product is Finance, then Spread, then Word

5. Copyright © 2003 Pearson Education Canada Inc. Slide 16-172 Sales Volume Variance Static Budget Variance Pages 603 - 606 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

6. Copyright © 2003 Pearson Education Canada Inc. Slide 16-173 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 606 - 608

7. Copyright © 2003 Pearson Education Canada Inc. Slide 16-174 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 608 - 610

8. Copyright © 2003 Pearson Education Canada Inc. Slide 16-175 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 611 - 616

9. Copyright © 2003 Pearson Education Canada Inc. Slide 16-176 Mix and Yield Variances for Inputs Pages 620 - 623 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

10. Copyright © 2003 Pearson Education Canada Inc. Slide 16-177 Mix and Yield Variances Static Budget Variance Pages 620 - 623 Flexible Budget VarianceSales Volume Variance Mix Variance Yield Variance Price Variance Efficiency Variance