Question

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.

Required:
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.



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  • CreatedFebruary 20, 2013
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