MAS.m-1424 Profit Variation Analysis

STRAIGHT PROBLEMS 1. Basic gross variation analysis.  The gross gross proft o o T Corporation Corporation or 212 an! an! 21" are gi#en $e%o&' Sa%es Less' CGS Gross Proft +nit sa%es pri,e +nit Cost +nit So%!

212 P () )  *) )  P 2) )  P 1*

21" P 12) )  1) ()  P 1) 2)  P 2-

12 -) 

22() 

Re/0ir e/0ire!' e!' Gross Gross proft proft #ariat #ariation ions s ana%s ana%sis) is) 0sing 0sing the' the' a. Tra!itiona ra!itiona%% t&o&a t&o&a #arian,e #arian,e ana%sis. ana%sis. (800,000) $. Tra!itiona ra!itiona%% three&a three&a #arian,e #arian,e ana%sis ana%sis.. (800,000) 2. Strategic proftability analysis.  The gross gross proft o o T Corporation Corporation or 212) an! 21" are gi#en $e%o&' 212 P () )  52) ) 6

21" P 12) )  52) "1) 6

Sa%es 3ire,t 4ateria%s 3ire,t %a$or 5() 6 5("*) 6 Other 52) 6 52) 6 e7penses Proft P-) )  P() *-)  +nit sa%es P 1* P 2- pri,e +nit ,ost 12 22+nit so%! -)  ()  3M' 80antit 2)  %$s. 21)  %$s.   Pri,e9%$. Pr P1 P11 3L' Ho Ho0rs )  hrs. "()  hrs.   Ra Rate9hr. P2 P22 Re/0i e/0irre!' e!' Stra Strate tegi gi, , prof profta ta$i $i%i %it t ana% ana%s sis is sh sho& o&in ing' g' a. Pri,e Pri,e re,o re,o#er #er  a,to a,tors rs.. $. Pro!0, Pro!0,ti#i ti#itr tre,o#e e,o#er r a,tors. a,tors. ,. Gro&t Gro&thr hre,o e,o#er #er  a,to a,tors rs.. ". Sales variance ratio. Sa%es %ast ear o P* 4i%%ion !e,rease! !e,rease! to P-. 4i%%ion. RE8+IRE3' 3eter4ine the sa%es pri,e #arian,e) sa%es /0antit #arian,e an! sa%es /0antit #arian,e ratio i' a. The +SP +SP in,rea in,reases ses $ $ 2:. 2:. ;< ;< 51-6< 51-6< 2-: 2-: $. The +SP +SP !e,rease !e,reases s $ :. :. 522-6< 522-6< 5"=-6< 5"=-6< *.2-:< *.2-:< ,. The /0ant /0antit it so%! so%! in,rea in,reases ses $ -:. -:. 5;6< 5;6< *< *< -: . Cost variance ratios. Cost o goo!s so%! this ear a4o0nting to P;.* 4i%%ion is 2: higher than that o %ast ear. On the a#erage) ,ost pri,es in,rease! $ 2-:.

RE8+IRE3' ,o4p0te the o%%o&ing' a. Cost pri,e #arian,e. 51;26 $. Cost /0antit #arian,e an! ,ost /0antit #arian,e ratio. "2< : -. CM variance analysis. The ,ontri$0tion 4argin o H Corporation or 212 an! 21" are gi#en $e%o&' Sa%es Less' >aria$%e ,osts CM

212 21" P () ) P 12) )   *) )  () ) 

P 2) ) P ) )    The n04$er o 0nits so%! in,rease! $ -:. RE8+IRE3' ,o4p0te the o%%o&ing or the ear 21"' a. Sa%es pri,e #arian,e an! sa%es pri,e #arian,e ratio. ")*< 2.(-: $. Sa%es /0antit #arian,e.  ,. >aria$%e ,ost pri,e #arian,e an! #aria$%e ,ost pri,e #arian,e ratio. 51=6< 2*.;(: !. >aria$%e ,ost /0antit #arian,e. 5"6 *. Gross proft variance analysis. B 3istri$0tions presents the o%%o&ing !ata or t&o tpes o ,anne! pro!0,ts) T an! A) or 212 an! 21"' 212 +nits Sa%es  T A

Per +nit

G Proft

Per +nits

() 

P (.

P *) 

12)

P 1.

() 

.

2)  ;*)  ()  2)  =2)  P 2) 

2) 

*.

CGS  T S

A4o0nt

21" +nits

()  () 

P *. ". 

1*) 

P 1.-

A4o0nt P12)  12)  2) 

12)  2) 

P ;. -.

"2) 

P 1.

1()  1)  2()  P"2) 

Re/0ire!' ,o4p0te the pri,e) sa%es 4i7 an! fna% sa%es #o%04e #arian,es. *)< 51*)6< () =. Market variance analysis. Pri40s ?ater reporte! the o%%o&ing sa%es !ate in 21"' ?estern Region Co%a Co. Mar@et share +nit sa%es pri,e

A,t0a% 2 4i%%ion " 4i%%ion 12.-: P 11.

B0!gete! 2- 4i%%ion 2.- 4i%%ion 1: P 1.

B0!gete! +CM Re/0ire!'

P ". 

Ca%,0%ate the 4ar@etshare an! 4ar@etsie #arian,es or Pri40s ?ater in 21". Ca%,0%ate a%% #arian,es in ter4s o ,ontri$0tion 4argin. Co44ent on res0%ts. 1)()< 5")6

MUL!"L# C$%!C# &U#S!%'S 1. G Corporation) &hi,h se%%s a sing%e pro!0,t) pro#i!e! the o%%o&ing !ata ro4 its in,o4e state4ents or the ,a%en!ar ears) 21" an! 212' Sa%es 51-)  0nits6 Cost o Goo!s So%! Gross proft

21" P =-)  -2-) 

P 22-)  212 5Base ear6 Sa%es 5 1() 6 P =2)  Cost o goo!s so%! -=-)  Gross proft P 1-)  In an ana%sis o #ariation in gross proft $et&een the t&o ears) &hat &o0%! $e the ee,ts o ,hanges in sa%es pri,e an! sa%es #o%04eD Sa%es pri,e Sa%es #o%04e . "*0, 000 + " 0, 000 U+ B. P 1-)  + P 12)   C. P 1()   P 1-)  + 3. P 1()  + P 1-)   80estions 2 thro0gh  are $ase! on the o%%o&ing inor4ation'  The gross proft o R Co. or ea,h o the ears en!e! 3e,e4$er "1) 212 an! 21" &ere o%%o&s' 212 21" Sa%es P =;2)  P ()  CGS *)  ()  Gross proft "2()  P "2)  2. Ass04ing the se%%ing pri,es &ere 1: %o&er !0ring 21") &hat &o0%! $e the a4o0nt o !e,rease in gross proft !0e to the ,hange in se%%ing pri,eD A. P ()  B. P =2)  C. P =;) 2 -. " 88, 800 ". Ass04ing the /0antit so%! in,reases $ -: !0ring the ear) &hat &o0%! $e the a4o0nt o ,hange in gross proft !0e to this ,hangeD A. P";) *  B. ", /00 + C. P2") 2 + 3. P"1) *  . Ass04ing the /0antit so%! in,reases $ -: !0ring the ear) &hat &o0%! $e the per,entage ,hanges in ,ost pri,e !0e to this ,hangeD . ./8 B. ".(: C. =.(:

3. ".;;: -. ro4 the re,or!s o E Co. the o%%o&ing &ere ta@en 5in tho0san!s6'

*.

=.

(.

;.

80antit Sa%es Cost o Sa%es Pro!0,t B0!get A,t0a% B0!get A,t0a% B0!get A,t0a% Green -.( - -( 2= 2=.( Ann " 2*.= 1( 1(*.; 1( ;*.12 Co. ;." 2--.( 12=.; ( (1.( *-=.= ";" ";(.(2 3eter4ine the sa%es pri,e 5SP6) sa%es #o%04e 5S>6) ,ost pri,e 5CP6 an! ,ost #o%04e 5C>6 #arian,es' A. SP is P;)= a#ora$%e< S> is P"*) a#ora$%e< CP is P-)(2 a#ora$%e< an! C> is P 0na#ora$%e B. SP is P-)(2 a#ora$%e< S> is P a#ora$%e< CP is P"*)= a#ora$%e< an! C> is P;) a#ora$%e C. S" is "1,000 2avorable3 S4 is "5,600 2avorable3 C" is "03 an7 C4 is "*,80 n2avorable3 3. SP is P"*)= a#ora$%e< S> is P-)(2 a#ora$%e< CP is P 0na#ora$%e< an! C> is P;)  a#ora$%e E) In,.) has a pra,ti,a% pro!0,tion ,apa,it o t&o 4i%%ion 0nits) the ,0rrent earFs $0!get &as $ase! on the pro!0,tion an! sa%es o 1. 4i%%ion 0nits !0ring the ,0rrent ear. A,t0a% statisti,s ,a4e o0t to $e' pro!0,tion o 1. 4i%%ion 0nits an! sa%es o 1.2 4i%%ion. Se%%ing pri,e is at P2 ea,h an! the ,ontri$0tion 4argin ratio is ":. The peso #a%0e that $est /0antifes the 4ar@eting !i#isionFs ai%0re to a,hie#e $0!gete! peror4an,e or the ,0rrent ear is A. P)() + B. P)) + C. P1)) + 3. P1)2) + In gross proft ana%sis) i the ,ost #arian,e is ero) s0,h #arian,e in!i,ates that' A. Man0a,t0ring 4anage4ent &as 0na$%e to @eep pro!0,tion ,osts at $0!gete! ,osts. B. Man0a,t0ring 4anage4ent &as a$%e to ,ontro% pro!0,tion ,ost $e%o& $0!gete! ,osts. C. Man2actring 9anage9ent :as able to control pro7ction cost at b7gete7 costs. 3. Man0a,t0ring 4anage4ent &as not a$%e to ,ontro% pro!0,tion at $0!gete! ,osts $0t p0r,hasing &as a$%e to @eep at $0!gete! pri,e.. The !ieren,e $et&een the 4aster $0!get a4o0nt an! the a4o0nts in the e7i$%e $0!get are !0e to . ctivity level variances B. a#ora$%e #arian,es C. Gaps in ae,ti#it 3. +na#ora$%e #arian,es In ana%ing operation) the ,ontro%%er o a Corporation o0n! a P2-)  a#ora$%e e7i$%e $0!get re#en0e #arian,e. The #arian,e &as ,a%,0%ate! $

,o4paring the a,t0a% res0%ts &ith the e7i$%e $0!get. This #arian,e ,an $e &ho%% e7p%aine! $ . ;e total s b7gete7 9arket s;are an7 t;e actal total 9arket si?e. 3. EasternFs a,t0a% 4ar@et share an! the a,t0a% tota% 4ar@et sie. 80estions 1= an! 1( are $ase! on the o%%o&ing inor4ation. CJ) In,.) 4an0a,t0res an! se%%s $o7es o po,@et prote,tors. The stati, 4aster $0!get an! the a,t0a% res0%ts or Ma 21" appear $e%o&' A,t0a% B0!get +nit sa%es 12) 1) Sa%es P1"2) P1) >ar CGS =)( *) CM *1)2 ) i7e! Costs "2) ") proft P2;)2 P1) 1=.The operating in,o4e or CJ 0sing a e7i$%e $0!get or Ma 21" is A. P12) B. P") C. P1;)2 -. "8,000 1(.?hi,h one o the o%%o&ing state4ents ,on,erning CJFs a,t0a% res0%ts or Ma 21" is ,orre,tD A. The e7i$%e $0!get #arian,e is P() a#ora$%e.

B. The sa%es pri,e #arian,e is P"2) a#ora$%e. C. ;e sales vol9e variance is "8,000 2avorable. 3. The f7e! ,osts e7i$%e $0!get #arian,e is P) a#ora$%e.  The o%%o&ing inor4ation app%ies to /0estion app%ies to /0estions 1; thro0gh 2"' PeterFs Co4pan 4an0a,t0res tires. So4e o the ,o4panFs !ata &as 4isp%a,e!. +se the o%%o&ing inor4ation to rep%a,e the %ost !ata' A,t0a% Res0%ts

%e7i$%e B0!get >arian,e

%e7i$%e B0!get

Sa%es >o%04e >arian,es

+nit So%! 22-) 22-) Re#en0es P()1* P2)  5A6 P2)( + >aria$%e 5 C6 P + P"1)=2 P)*(  Costs i7e! Costs P1*)-* P1)=2  P1()2(  Proft P"-)( 536 P"2)1* 5 E6 1;.?hat a4o0nts are reporte! or re#en0es in the e7i$%e$0!get 5A6 an! the stati,$0!get 5 B6) respe,ti#e%D . "8,03 "8/,50 B. P(2)1*< P=;)"* C. P();*< P(")"* 3. P();*< P(();* 2.?hat are the a,t0a% #aria$%e ,ostsD . "1,0 B. P"*) C. P2=) 3. P"1)"2 21.?hat is the tota% e7i$%e$0!get #arian,e 536D A. P B. P12 + C. "1,10 + 3. P*(  22.?hat is the tota% sa%es#o%04e #arian,eD A. P2)(  B. P=)( + C. P=)(  -. ",880 + 2".?hat is the tota% stati,$0!get #arian,eD A. P")"2  B. "*,00 + C. P1)((  3. P1)(( +

Stati, B0!get 2*)2- 5B6 P"*) P1()2( P ")2(