Gina Matheson owns and operates a successful florist shop in Bloomington, Indiana. Gina estimates that her variable costs amount to $0.25 per sales dollar (i.e., variable costs represent 25% of revenue) and that her fixed costs amount to $6,000 per month. Gina budgets for $16,000 in revenue per month.
This past May, Gina’s actual revenue was $21,000. Gina attributes part of the increase to seasonal holidays (Mother’s Day, Memorial Day) and part of it to higher prices. She figures that, taking advantage of a surge in demand, she was able to increase her prices by 5% this past month. Gina’s actual total costs for May were $12,100, which included $6,300 in fixed costs.

a. What was Gina’s master budget profit and actual profit for May? What was Gina’s total profit variance for May?
b. Decompose Gina’s total profit variance for May into four numbers:
(1) The sales volume variance,
(2) The sales price variance,
(3) The variable cost variance, and
(4) The fixed cost spending variance.

  • CreatedFebruary 20, 2013
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