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Homework answers / question archive / Prepare a segment margin performance report for the pharmaceutical segment
Prepare a segment margin performance report for the pharmaceutical segment. Calculate a variance and a variance percentage for each line in the report. Round to the nearest hundredth for the variance percentages (for example, if your answer is 16.2384%, round it to 16.24%). Caxton Industries has gathered the following information about the actual sales revenues and expenses for its pharmaceuticals segment for the most recent year. (Click the icon to view the actual data.) Budgeted data for the same time period for the pharmaceutical segment are as follows (all data is in millions): (Click the icon to view the budgeted data.) Begin by preparing the performance report through the contribution margin line. Next, complete the report through the segment margin line, and then, finally, complete the report through the operating income line. (Enter the variances as positive numbers. Round the variance percentages to the nearest hundredth percent, X.XX%.) X - X Data Table Data Table Performance Report Caxton - Pharmaceutical Segment For Fiscal Year Ending December 31 Actual Bugeted Variance Variance % 9,100 Sales % Sales $ 75 Less Variable Expenses: 26 Variable Cost of Goods Sold % 819,000 250,796 142,688 112,350 22,440 15,260 Budgeted sales in units Budgeted average selling price per unit $ Variable Cost of Goods Sold per unit $ Variable Operating Expenses per unit $ Direct Fixed Manufacturing Overhead (in total) $ Direct Fixed Operating Expenses (in total) $ Common Fixed Expenses Allocated to the Pharmaceutical Segment.... $ 16 Variable Cost of Goods Sold $ Variable Operating Expenses $ Direct Fixed Manufacturing Overhead $ Direct Fixed Operating Expenses ........$ Common Fixed Expenses Variable Operating Expenses % Contribution Margin % 105,000 22,000 14,000 ......... $ Print Done Print Done
Answer:
| Performance Report | ||||
| Caxton - Pharmaceutical Segment | ||||
| For Fiscal Year Ending December 31 | ||||
| Actual | Budgeted | Variance | Variance % | |
| Sales | $819,000 | $682,500 | $136,500 F | 20% |
| Less: Variable expenses | ||||
| Variable cost of goods sold | $250,796 | $236,600 | $14,196 U | 6% |
| Variable operating expense | $142,688 | $145,600 | $2,912 F | 2% |
| Contribution margin | $425,516 | $300,300 | $125,216 F | 41.69% |
| Less: Direct fixed expenses | ||||
| Direct fixed manufacturing overhead | $112,350 | $105,000 | $7,350 U | 7% |
| Direct fixed operating expenses | $22,440 | $22,000 | $440 U | 2% |
| Segment margin | $290,726 | $173,300 | $117,426 F | 67.75% |
| Less: common fixed expenses | $15,260 | $14,000 | $1,260 U | 9% |
| Operating income | $275,466 | $159,300 | $116,166 F | 72.92% |
Working notes:
1. Contribution margin = Sales - Variable expenses
Segment margin = Contribution margin - Direct fixed expenses
Operating income = Segment margin - Common fixed expenses
2. Variance = Difference between actual and budgeted
Variance % = (Variance / Budgeted figure) * 100
a. in case of sales, contribution margin and segment margin and operating income, if the actual figure is greater than budgeted figure, then the variance is favourable(F) and if the actual figure is less than the budgeted figure, then the variance is unfavourable(U).
b. in case of all other expenses, if actual figure is greater than budgeted figure - variance is unfavourable(U) and if actual figure is less than the budgeted figure - Variance is favourable(F)
3. Budgeted sales = 9,100 units * $75 = $682,500
Budgeted variable cost of goods sold = 9,100 units * $26 = $236,600
Budgeted variable operating expense = 9,100 units * $16 = $145,600
