PRODUCT PRICING AND

GROSS PROFIT VARIANCE

ANALYSIS part4
- D.D.B.A

Contribution Margin Variance Analysis

Sample Problem #5:
Crispy Corporation
Comparative Income Statement Data
For the Years Ended, December 31, 2011 and 2012
2011
Sales

2012

90,000

Increase(Decrease)

96,000

6,000

Less: Variable Costs

54,000

52,000

(2,000)

Contribution Margin

36,000

44,000

8,000

3,600

4,000

400

Unit Sold
Unit Sales Price
Unit Variable Costs

25
15

24
13

P
P

(1)
(2)

Contribution Margin Variance Analysis

Solution:
Sales Variances:
Sales Price Variance [4,000u x (P 1)]

(4,000)

Sales Quantity Variance (400u x P 24)

10,000

6,000

Variable Cost Variances:

Variable Cost Price Variances [4,000u x (P 2)] P
Variable Cost Quantity Variances (400u x P15)
(2,000)
Net Contribution Margin Variance

(8,000)
6,000
P

8,000

Gross Profit Variance Analysis

(only one variance ratio is given)
Sales Variances:
QSTY x USPTY = Sales this year
QSTY x USPLY = Applied Sales this year
QSLY x USPLY = Sales last year

Sales Price Variance

Sales Quantity
Variance

Where:
QSTY Quantity Sold this year

USPTY Unit Sales this year

QSLY Quantity Sold last year

USPLY Unit Sales last year

Gross Profit Variance Analysis

(only one variance ratio is given)
For example:
USPLY = P 200 QSLY = P 40,000
USPTY = P 240 QSTY = P 44,000
Sales Price Variance Ratio = 20% (P40/P200), where P40 = P 240 P 200.
Sales Quantity Variance Ratio = 10% (P4,000/P40,000), where 4T = 44T-40T.
Given:Formula:
1. Sales price variance ratio: STY @ USPTY
(1 Sales price variance ratio)

2. Sales quantity variance ratio: STY @ USPLY=

Sales this year

Sales
x
last year

(1 Sales
quantity variance
ratio)

Gross Profit Variance Analysis

(only one variance ratio is given)
Cost this year

= QSTY x UCPTY

Cost this year @ UCP last year

Cost last year

Cost Price Variance

= QSTY x UCPLY

= QSLY x UCPLY

Given:Formula:
1. Cost price variance ratio: CTY @ UCPTY
(1 Cost price variance ratio)

Cost Quantity Variance

Cost this year

Cost last
2. Cost quantity variance ratio: CLY @ UCPLY = x
year

(1 Sales
quantity variance
ratio)

Gross Profit Variance Analysis

(only one variance ratio is given)
Sample Problem #6:
Arabian Corporation
For the Years Ended, December 31, 2011 and 2012
2011
Sales

2,000,000

2012
P

2,340,000

Less: Variable Costs

1,400,000

1,911,000

Contribution Margin

600,000

429,000

Change + (-)
P

340,000
511,000
(171,000)

Solutions:
Sales Price Variance
Sales this year

2,340,000

Less: STY @ USPLY

(P 2,340,000/90%)

2,600,000

(260,000) U

Sales Quantity Variance

STY @ USPLY

2,600,000

Less: Sales last year

2,000,000

600,000 F

Cost Price Variance

Cost this year

1,911,000

Less: CTY @ UCPLY

(P 1,400,000/130%)

1,820,000

91,000 U

Cost Quantity Variance

CTY @ UCPLY

1,820,000

Less: Cost last year

1,400,000

Gross Profit Variance

420,000 U
P

171,000 U

1) STY @ USPLY = P 2,340,000 / 90%

2) Sales Quantity Variation Ratio =
=
=

SQV/SLY
P 600,000/P 2,000,000
30% F (Increase)

3) CTY @ UCPLY = CLY x 130%

= P 1,820,000
CQV
= P 1,820,000 P 1,400,000
= P 420,000
CPV
= P 1,911,000 P 1,820,000
= P
91,000
Cost Price Variance Ratio =
=
=

CPV/CTY@UCPLY
P 91,000 / P 1,820,000
5% (increased)

4) Sales Price Variation Ratio

= SPV / STY @ USPLY

= P 260,000 / P 2,600,000 = 10%

(Decrease)
5)

VARIATION RATIOS

FORMULAS

a.Sales

price variation ratio

Sales price variance / STY @ USPLY

b.Sales

quantity variation ratio

Sales quantity variation / SLY

c.Cost

price variance ratio

Cost price variation / CTY @ UCLY

d.Cost

quantity variation ratio

Cost quantity variation / CLY

Multiproduct Gross Profit Variation

Sales price variation = USP x QSTY
Cost price variation

= UCP x QSTY

Sales mix variance

xx
xx

Gross profit (GP) this year @ UGP last year

xx

Less: GP this year @ Average unit GP last year

xx

Sales mix variance

xx

Sales yield variance (Final sales volume variance):

Gross profit this year @ Average unit GP last year
Less: GP last year

xx
xx

Sales yield variance

Net Gross Profit Variance

xx
P

xx

Multiproduct Gross Profit Variation

Sample Problem #7
Android VII Corp. sells three products Mapayat, Mataba, and Medyolang.
The sales, cost of goods sold, and gross profit of the three products in 2011
and 2012 are given below.
2011
Sales :
Mapayat (8,000u x P8) = P
64,000
(20,000u x P6)
Mataba(26,000u x P4) = 104,000
(22,000u x P5)
Medyolang (12,000u x P10) =
120,000
(13,000u x P12)
288,000
Costs :
Mapayat (8,000u x P8) =
40,000
(20,000u x P4)
Mataba
(26,000u x P4)
=
52,000
(20,000u x P4)
Medyolang(12,000u x P10) = 72,000
(20,000u x P6)
164,000
Gross Profit (46,000 x P2.69565) 124,000 (55,000u x P2.32727)

*Only slides 1-11 are

included

Contribution Margin Variance Analysis

Sales Variances:
QSTY x USPTY = Sales this year
QSTY x USPLY = Applied Sales this year
QSLY x USPLY = Sales last year

Sales Price Variance

Sales Quantity
Variance

Sum of
Sales
Variance

Variable Costs Variances:

QSTY x UVCTY = Sales this year
QSTY x UVCLY = Applied Sales this year
QSLY x UVCLY = Sales last year
Net Contribution Margin Variance

Variable Cost Price Variance

Variable Cost Quantity Variance

Sum of
Variable Cost
Variance