Question 1
When there is a lesser degree of homogeneity, fewer cost pools are required to accurately explain the use of company resources.Question 2
Blue States Coffee, Inc., sells two types of coffee, Colombian and Blue Mountain. The monthly budget for U.S. coffee sales is based on a combination of last year's performance, a forecast of industry sales, and the company's expected share of the U.S. market. The following information is provided for March:| Actual | Budget |
| Colombian | Blue Mountain | Colombian | Blue Mountain |
| Sales in pounds | 15,000 lbs. | 17,000 lbs. | 13,500 lbs. | 18,000 lbs |
| Price per pound | $13.00 | $16.00 | $13.00 | $16.00 |
| Variable cost per pound | 5.00 | 9.00 | 6.50 | 9.00 |
| Contribution margin | $8.00 | $7.00 | $6.50 | $7.00 |
Answer 1
falseAnswer 2
| a. | Actual contribution margin: | 15,000 x $8.00 = $ 120,000 |
| 17,000 x $7.00 = 119,000 |
| $239,000 |
| b. | Static-budget contribution margin: | 13,500 x $6.50 = $ 87,750 |
| 18,000 x $7.00 = 126,000 |
| $213,750 |
| c. | Flexible-budget contribution margin: | 15,000 x $6.50 = $ 97,500 |
| 17,000 x $7.00 = 119,000 |
| $216,500 |
| d. | Static-budget variance = $213,750 - $239,000 = $25,250 favorable |