Pipe Company makes professional Pipes. The profit plan and actual results for the previous year, 2020, are
Question:
- Pipe Company makes professional Pipes. The profit plan and actual results for the previous year, 2020, are as follows:
Actual Results | Profit Plan | |||
Volume | Pounds | Volume | Pounds | |
Sales | 30,000 | 360,000 | 32,000 | 480,000 |
Cost of Goods Sold | ||||
Raw material (KG) | 3,200 | 64,000 | 3,000 | 45,000 |
Raw material (L) | 7,500 | 75,000 | 5,000 | 80,000 |
Labor (Hours) | 4,000 | 92,000 | 5,000 | 125,000 |
Contribution Margin | 129,000 | 230,000 | ||
Other costs | ||||
Energy | 15,000 | 25,000 | ||
Maintenance | 6,000 | 12,000 | ||
Depreciation | 10,000 | 20,000 | ||
Selling expenses | 20,000 | 25,000 | ||
Advertising | 5,000 | 10,000 | ||
Profit before interest and tax | 73,000 | 138,000 |
The plant manager, Khaled, has instructed the plant management accountant to prepare a detailed report to be sent to corporate headquarters comparing each component’s actual result with the amounts set forth above in the annual budget.
Required: Explain the difference between the expected and actual profit. Show your workings.
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Core Concepts Of Accounting Information Systems
ISBN: 9781118738108
1st Canadian Edition
Authors: Mark G. Simkin, Carolyn A. Strand Norman, Scott Paquette