Gross Profit Analysis Solved Problems:
Learning Objective:
- Calculate sales price variance, sales volume variance, cost price variance, cost volume variance, sales mix variance, and final sales volume variance.
Problem 1:
A cost analyst of the Memphis Company has prepared a monthly gross profit analysis, comparing actual to budget for its two products, Alco and Bacco. June actual and budget data show:
|
Sales |
Cost of Goods Sold |
Gross Profit |
|
Units |
Unit Price |
Amount |
Unit Cost |
Amount |
Per unit |
Amount |
| Budget: |
|
|
|
|
|
|
|
| Alco |
8,000 |
$20.00 |
$160,000 |
$16.00 |
$128,000 |
$4.00 |
$32,000 |
| Bacco |
4,200 |
14.00 |
58,800 |
12.00 |
50,400 |
2.00 |
8,400 |
|
———- |
———- |
———- |
———– |
———- |
———- |
———– |
| Total budget |
12,200 |
$17.9344* |
$218,800 |
$14.6229* |
$178,400 |
$3.3115* |
$40,400 |
|
====== |
====== |
====== |
====== |
====== |
====== |
====== |
|
|
|
|
|
|
|
|
| Actual: |
|
|
|
|
|
|
|
| Alco |
7,500 |
$21.00 |
$157,500 |
$16.50 |
$123,750 |
$4.50 |
$33,750 |
| Bacco |
4,500 |
13.50 |
60,750 |
11.50 |
51,750 |
2.00 |
9,000 |
|
———- |
———- |
———– |
———– |
———- |
———– |
———– |
| Total actual |
12,000 |
$18.1875* |
$218,250 |
$14.625* |
$175,500 |
$3.5625* |
$42750 |
|
|
|
|
|
|
|
|
| *Weighted average |
Required:
- Calculate price and volume variances for sales and cost.
- Calculate sales mix variance and final sales volume variances.
Solution:
| Actual sales |
|
$218,250 |
| Actual sales at budgeted price: |
|
|
| Alco: 7,500 @ $20 |
$150,000 |
|
| Bacco: 4,500 @ 14 |
63,000 |
213,000 |
|
|
————– |
| Favorable sales price variance |
|
$5,250 |
|
|
======= |
| Actual sales at budgeted price |
|
213,000 |
| Budgeted sales |
|
218,800 |
|
|
————– |
| Unfavorable sales volume variance |
|
$5,800 |
|
|
======= |
| Cost of goods sold actual |
|
$175,500 |
| Budgeted costs of actual units sold: |
|
|
| Alco: 7,500 @ $16 |
$120,000 |
|
| Bacco: 4,500 @ $12 |
54,000 |
|
|
————— |
174,000 |
|
|
————– |
| Unfavorable cost price variance |
|
$1,500 |
|
======== |
| Budgeted costs of actual units sold |
|
$174,000 |
| Budgeted costs of budgeted units sold |
|
178,400 |
|
|
————— |
| Favorable cost volume variance |
|
$4,400 |
|
|
======== |
Interim Recapitulation:
| Favorable sales volume variance |
|
$5,250 |
| Less unfavorable volume variance (net) consisting of: |
|
|
| Unfavorable sales volume variance |
$5,800 |
|
| Less favorable cost volume variance |
4,400 |
|
|
———- |
1,400 |
|
|
——- |
|
|
$3,850 |
| Less unfavorable cost price variance |
|
1,500 |
|
|
———- |
| Increase in gross profit |
|
$2,350 |
|
|
======= |
Problem 2:
The Summers Sporting Goods Shop presents the following data for two types of racquetball gloves, leather and fabric, for 19A and 19B.
|
19A |
19B |
|
Units |
Per unit |
Amount |
Units |
Per unit |
Amount |
| Sales: |
|
|
|
|
|
|
| Leather racquetball gloves |
8,000 |
$8.00 |
$64,000 |
12,000 |
$10.00 |
$120,000 |
| Fabric racquetball gloves |
8,000 |
$4.00 |
$32,000 |
20,000 |
$6.00 |
$120,000 |
|
|
|
———- |
|
|
——— |
|
|
|
$96,000 |
|
|
$240,000 |
|
|
|
======= |
|
|
====== |
| Cost of Goods Sold |
|
|
|
|
|
|
| Leather racquetball gloves |
8,000 |
$6.00 |
$48,000 |
12,000 |
9.00 |
$108,000 |
| Fabric racquetball gloves |
8,000 |
$3.00 |
$24,000 |
20,000 |
5.00 |
100,000 |
|
|
|
———— |
|
|
———- |
|
|
|
$72,000 |
|
|
$208,000 |
|
|
|
———— |
|
|
———- |
| Gross profit |
16,000 |
$1.50 |
$24,000 |
32,000 |
$1.00 |
$32,000 |
|
|
|
======= |
|
|
====== |
Required:
- Calculate price and volume variances for sales and cost.
- The sales mix and final sales volume variances.
Solution:
|
