Analysis of Unfavourable Income Variance

"The Markley Division of Rosette Industries manufactures and sells patio chairs. The chairs are manufactured in two versions: a metal model and a plastic model of a lesser quality. The company uses its own sales force to sell the chairs to retail stores and to catalog outlets. Generally, customers purchase both the metal and plastic versions.
The chairs are manufactured on two different assembly lines located in ad¬-joining buildings. The division management and sales department occupy the third building on the property. The division management includes a division controller responsible for the divisional financial activities and the preparation of reports ex¬plaining the differences between actual and budgeted performance. The controller structures these reports such that the sales activities are distinguished from cost factors so that each can be analyzed separately.
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