Gross Profit Variance Analysis – Lecture Notes

PROBLEM 1

A company’s budgeted and actual gross profit (in pesos) for a single product follows:

Budgeted Actual Change Percent

Sales 50,000 53,000 3,000 6.0%
Cost of sales 25,000 27,500 -2,500 10.0%
Gross profit 25,000 25,500 500 2.0%

Gross profit ratio 50% 48.1%

Cost ratio 50% 51.9%

Cost data per unit follows:

Actual (4,000 units) Budget (5,000 units)

Sales price 13.25 10.00
Cost of sales 6.875 5.00
Gross profit 6.375 5.00

Compute for the:

a. Sales variance
b. Cost variance
c. Volume variance

PROBLEM 2

A company’s budgeted and actual gross profit (in pesos) for a single product follows:

Budgeted Actual
Sales 50,000 53,000
Cost of sales 25,000 27,500
Gross profit 25,000 25,500

Gross profit ratio 50% 48.1%

Cost ratio 50% 51.9%

The actual sales price increased by 32.5% from the planned selling price.

Compute for the:

a. Sales variance
b. Cost variance
c. Volume variance

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Gross Profit Variance Analysis – Lecture Notes

PROBLEM 3

A company’s budgeted and actual gross profit (in pesos) for a single product follows:

Budgeted Actual
Sales 50,000 53,000
Cost of sales 25,000 27,500
Gross profit 25,000 25,500

Gross profit ratio 50%

Cost ratio 50%

The actual sales volume was short by 20% from planned unit sales.

Compute for the:

a. Sales variance
b. Cost variance
c. Volume variance

PROBLEM 4

The following data pertain to R.W.M. Company:

Budget Actual
Sales 65,000 69,000
Cost of sales 50,000 53,000
Gross profit 15,000 16,000

Actual sales (in units) 5,520

Budget sales (in units) 5,000

Compute for the following to support the change in gross profit:

a. Sales variance
b. Cost variance
c. Volume variance

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