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:
