[Anonymous]

Hey guys, I’m really struggling with this problem and was hoping someone could help me out.

Folsom Fashions sells a line of women’s dresses. Folsom’s performance report for November Year 1 follows.

Actual:
Dresses Sold: 5,000; Sales: $235,000; variable costs: $145,000; contribution margin: $90,000; fixed costs: $84,000; operating income: $6,000

Budget:
Dresses Sold: 6,000; Sales: $300,000; variable costs: $180,000; contribution margin: $120,000; fixed costs: $80,000; operating income: $40,000

The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income.

The effect of the sales volume variance on the contribution margin for November is:

A) $15,000 unfavorable
B) $18,000 unfavorable
C) $20,000 unfavorable
D) $30,000 unfavorable

I understand how it’s $20,000 because (6,000-5,000) x (120,000/6,000) but can someone help me understand it using the following method:

……………………………………………………Actual//Flexible Variance//Flexible Budget//Sales Volume Variance//Budget
Dresses sold……………………………5,000…………………………………………………5,000
Sales……………………………………$235,000………………$(5,000)……………$240,000………………$(60,000)……………$300,000
Variable costs………………………$145,000………………$(1,000)……………$(144,000)…………………$36,000…………$(180,000)
Contribution margin………………$90,000………………$(6,000)………………$96,000………………$(24,000)……………$120,000
Fixed costs………………………………$84,000………………$(4,000)……………$(80,000)…………………………$0………………$(80,000)
Operating income……………………$6,000……………$(10,000)………………$16,000………………$(24,000)………………$40,000

From this method, I’m getting $24,000 as the answer. Is this method incorrect or am I using it incorrectly? Any help is appreciated, thank you!