Outdoor Life makes three different product lines of outdoor furniture: recliners, chairs, and table sets. The company is known for its distinctive materials, so all three product lines offer the same options for materials and colors. They clearly vary in the amount of material used. Also, the freestanding chairs are exactly like the table chairs for each fashion grouping, so they can be used as additional seating or as freestanding chairs. That means there is some cross- selling that takes place between table sets and chairs. Management has decided it would like to compare the performance of the three lines against its budget. Managers have prepared the following information for you and have asked that you do the analysis.

REQUIRED:

a. Prepare a line item variance report for the three product lines at McGregor’s. Remember that positive variances for revenues are favorable (actual larger than budget) and positive variances for expenses are unfavorable.

b. Convert everything in the tables into percentages.

c. Prepare a line item variance report using your percentages.

d. Compare the variances when using absolute dollars to those using percentages, focusing on line items where the percentage variance gives a different picture of performance than the absolute variances. Do they give the same information? Why or why not?

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Outdoor Life Line ltem Rediners Chairs Table Sets Budget Actud Budget Actudl Budget Actual Revenue $30,000,000 $27,850,000 $45,000,000 $48,000,000 $60,000,000 $62,500,000 Less: Cost of goods sold $14,400,000 $13,500,000 $20,250,000 $20,160,000 $28,800,000 $28,750,000 Gross margin Sales calls $15,600,000 $14,350,000 $24,750,000 $27,840,000 $31,200,000 $33,750,000 $2,500,000 $2,400,000 $2,400,000 $3,000,000 $4,800,000 $5,000,000 Order processing Shipping $4,600,000 $4,200,000 $3.500,000 $3,800,000 $4,600,000 $4,800,000 $1,500,000 $1,300,000 $1,600,000 $1,800,000 S3,000,000 $3,500,000 General overheod $3,600,000 $3,400,000 $4,800,000 $5,000,000 $6,300,000 $6,800,000 Total SG&A $12,200,000 S11,300,000 $12,300,000 S13,600,000 $18,700,000 $20,100,000 Profit before tax $3,400,000 $3,050,000 $12,450,000 $14,240,000 $12,500,000 $13,650,000 Profit percentoge 10.95% 20.83% 11.33% 27.67% 29.67% 21.84%