Analysis of Gross Profit Example
29
Sales Price Variance: Formula: Sales Price Variance Rate means Sales rate Product X (Difference b/w base year rate and current y Product Y (Difference b/w base year rate and current y Product Z (Difference b/w base year rate and current y OR Product Base Year Current Year Variance Sales Rate Sales Rate X 5 6.6 1.6 Fav Y 4 3.5 0.5 Unfav Z 2.6 3 0.4 Fav SALES PRICE VARIA Sales Volume Variance: Formula: Sales Volume Variance Product X (Difference b/w base year units and current Product Y (Difference b/w base year units and current Product Z (Difference b/w base year units and current SALES V OR Product Base Year Current Year Variance Units Units X 8,000 10,000 2,000 Fav Y 7,000 4,000 3,000 Unfav Z 20,000 20,000 0 SALES VOLUME VARI
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Transcript of Analysis of Gross Profit Example
Sales Price Variance:
Formula: Sales Price Variance Rate means Sales rate
Product X (Difference b/w base year rate and current year rate) x Current Sales (in units)
Product Y (Difference b/w base year rate and current year rate) x Current Sales (in units)
Product Z (Difference b/w base year rate and current year rate) x Current Sales (in units)SALES PRICE VARIANCE
ORProduct Base Year Current Year Variance Current
Sales Rate Sales Rate Sales (in units)
X 5 6.6 1.6 Fav 10,000
Y 4 3.5 0.5 Unfav 4,000
Z 2.6 3 0.4 Fav 20,000 SALES PRICE VARIANCE
Sales Volume Variance:
Formula: Sales Volume Variance
Product X (Difference b/w base year units and current year units) x Base year rate
Product Y (Difference b/w base year units and current year units) x Base year rate
Product Z (Difference b/w base year units and current year units) x Base year rate
SALES VOLUME VARIANCE
ORProduct Base Year Current Year Variance Base year
Units Units Sales Rate
X 8,000 10,000 2,000 Fav 5
Y 7,000 4,000 3,000 Unfav 4
Z 20,000 20,000 0 2.60
SALES VOLUME VARIANCE
Cost Price Variance:
Formula: Cost Price Variance Rate means cost rate
Product X (Difference b/w base year rate and current year rate) x Current Sales (in units)
Product Y (Difference b/w base year rate and current year rate) x Current Sales (in units)
Product Z (Difference b/w base year rate and current year rate) x Current Sales (in units)
COST PRICE VARIANCE
ORProduct Base Year Current Year Variance Current
Rate Rate Sales (in units)
X 4 4 0 10,000
Y 3.5 3.5 0 4,000
Z 2.175 2.80 0.625 Unfav. 20,000
COST PRICE VARIANCE
Cost Volume Variance:
Formula: Cost Volume Variance Rate means cost rate
Product X (Difference b/w base year units and current year units) x Base year rate
Product Y (Difference b/w base year units and current year units) x Base year rate
Product Z (Difference b/w base year units and current year units) x Base year rate
COST VOLUME VARIANCE
ORProduct Base Year Current Year Variance Base year
Units Units Cost Rate
X 8,000 10,000 2,000 Unfav 4
Y 7,000 4,000 3,000 Fav 3.50
Z 20,000 20,000 0 2.18
COST VOLUME VARIANCE
If nos. of units increased (in sales) resulting increase in the cost spending
Sales Mix Variance:
Formula (Difference b/w current year sales and current year sales at base year mix) x Base year G.P.
Product Current year Base year Current year sales Variance Base year Sales Mixing % at base yr. Mixing Gross Profit
X 10,000 0.2286 7,771 2,229 Fav 1.00
Y 4,000 0.2000 6,800 2,800 Unfav 0.50
Z 20,000 0.5714 19,429 571 Fav 0.425
34,000 1 34,000 Sales Mix Variance
Base year sales mixing ratio: Product Base yr Base year
Sales Mixing ratio
X 8,000 0.2286
Y 7,000 0.2000
Z 20,000 0.5714
35,000 1
Final Sales Volume Variance
Formula: (Difference b/w base years and current sales (in units)) x average base year gross profit per unit
W-1 Average base year gross profit per unit = Total Gross profitTotal Nos. of units
= $ 20,000 =0.571435,000 units
Formula: (Difference b/w Total base years and Totalcurrent sales (in units)) x average base year gross profit per unit
Total nos. of units sold in base year 35,000 Total nos. of units sold in current year 34,000
Difference 1,000 UnfavAverage base year G.P 0.5714
571 Unfav
(Difference b/w base year rate and current year rate) x Current Sales (in units) xxxx
(Difference b/w base year rate and current year rate) x Current Sales (in units) xxxx
(Difference b/w base year rate and current year rate) x Current Sales (in units) xxxxSALES PRICE VARIANCE xxxx
Sales PriceVariance
16,000 Fav
2,000 Unfav
8,000 Fav 22,000 Fav
xxxx
xxxx
xxxx
SALES VOLUME VARIANCE xxxx
Sales VolumeVariance
10,000 Fav
12,000 Unfav
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2,000 Unfav
(Difference b/w base year rate and current year rate) x Current Sales (in units) xxxx
(Difference b/w base year rate and current year rate) x Current Sales (in units) xxxx
(Difference b/w base year rate and current year rate) x Current Sales (in units) xxxx
COST PRICE VARIANCE xxxx
Cost PriceVariance
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12,500 Unfav
12,500 Unfav
xxxx
xxxx
xxxx
COST VOLUME VARIANCE xxxx
Cost VolumeVariance
8,000 Unfav
10,500 Fav
-
2,500 Fav
Formula (Difference b/w current year sales and current year sales at base year mix) x Base year G.P.
Sales Mix Variance
2,229 Fav
1,400 Unfav
243 Fav
1,071 Fav
(Difference b/w base years and current sales (in units)) x average base year gross profit per unit
(Difference b/w Total base years and Totalcurrent sales (in units)) x average base year gross profit per unit
Sales Price Variance:
Product Base Year Current Year VarianceSales Rate Sales Rate
Leather Gloves 8 10 2 Fav
Fabric Gloves 4 6 2 Fav
SALES PRICE VARIANCE
Product Base Year Current Year VarianceUnits Units
Leather Gloves 8,000 12,000 4,000 Fav
Fabric Gloves 8,000 20,000 12,000 Fav
SALES VOLUME VARIANCE
Cost Price Variance:Product Base Year Current Year Variance
Cost Rate Cost Rate
Leather Gloves 6 9 3 Unfav
Fabric Gloves 3 5 2 Unfav
Cost PRICE VARIANCE
Cost Volume Variance:
Product Base Year Current Year VarianceUnits Units
Leather Gloves 8,000 12,000 4,000 Unfav
Fabric Gloves 8,000 20,000 12,000 Unfav
Cost VOLUME VARIANCE
Sales Mix Variance:
Formula (Difference b/w current year sales and current year mix at base year mix) x Base year G.P.
Product Current year Base year Actual Qty Variance Sales Mix % at base yr. mix
Leather Gloves 12,000 50.00 16,000 4,000 Unfav
Fabric Gloves 20,000 50.00 16,000 4,000 Fav
32,000 100 32,000 Sales Mix Variance
Final Sales Volume Variance
Formula: (Difference b/w Total base years and Totalcurrent sales (in units)) x average base year gross profit per unit
Total nos. of units sold in base year 16,000 Total nos. of units sold in current year 32,000
Difference 16,000 FavAverage base year G.P 1.5
24,000 Fav
Current Sales PriceSales (in units) Variance
12,000 24,000 Fav
20,000 40,000 Fav
SALES PRICE VARIANCE 64,000 Fav
Base year Sales VolumeSales Rate Variance
8 32,000 Fav
4 48,000 Fav
SALES VOLUME VARIANCE 80,000 Fav
Current Cost Price
Sales (in units) Variance
12,000 36,000 Unfav
20,000 40,000 Unfav
Cost PRICE VARIANCE 76,000 Unfav
Base year Sales VolumeSales Rate Variance
6 24,000 Unfav
3 36,000 Unfav
Cost VOLUME VARIANCE 60,000 Unfav
Formula (Difference b/w current year sales and current year mix at base year mix) x Base year G.P.
Base year Sales Mix Gross Profit Variance
2.00 8,000 Unfav
1.00 4,000 Fav
Sales Mix Variance 4,000 Unfav
(Difference b/w Total base years and Totalcurrent sales (in units)) x average base year gross profit per unit
Ex-6 M&U + Paper
Revenue Price Variance:
Rate per day: = Patient service revenue / Impatient Service days(in thousand)
2003 = 12,000 / 300 days 40 per day
2004 = 13,860 / 330 days 42 per day
Revenue price variance = (Difference b/w base year rate and current year rate) x Current year (in days)(Rs. 42 - Rs. 40) x 330 days
Revenue price variance = 660 Fav
Revenue Volume Variance:
Revenue volume variance =(Difference b/w base year days and current year) x Base year rate(330 days - 300 days) x Rs. 40
Revenue volume variance = 1,200 Fav
Cost Price Variance:
Rate per day: = Total cost of services resident staff / Impatient Service days(in thousand)
2003 = 10,000 / 300 days 33.33 per day
2004 = 11,900 / 330 days 36.06 per day
Cost price variance = (Difference b/w base year rate and current year rate) x Current year (in days)(Rs. 36.06 - Rs. 33.33) x 330 days
Cost Price variance = 900.9 Unfav
Cost Volume Variance:
Cost volume variance =(Difference b/w base year days and current year) x Base year rate(330 days - 300 days) x Rs. 33.33
Cost volume variance = 1,000 Unfav.
Revenue Mix Variance:
Formula (Difference b/w current year sales and current year mix at base year mix) x Base year G.P.
Not possible
Final Sales Volume Variance
Average base year gross profit per unit = Total Gross profit 2,000,000 Total Nos. of units 300,000
Formula: (Difference b/w Total base years and Totalcurrent sales (in units)) x average base year gross profit per unit
Total nos. of units sold in base year 300Total nos. of units sold in current year 330
Difference -30 FavAverage base year G.P 6.6666667
(200) Fav
(Difference b/w base year rate and current year rate) x Current year (in days)
(Difference b/w base year rate and current year rate) x Current year (in days)
Formula (Difference b/w current year sales and current year mix at base year mix) x Base year G.P.
6.6666666666667
(Difference b/w Total base years and Totalcurrent sales (in units)) x average base year gross profit per unit
Exercise no.7Sales Price Variance:
Revenue price variance = (Difference b/w base year rate and current year rate) x Current year (in days)(Rs. 3 - Rs. 2.75) x 24,000 units
Revenue price variance = 6000 Unfav
Sales Volume Variance:
Revenue volume variance =(Difference b/w base year days and current year) x Base year rate(25,000 - 24,000) x 3
Revenue volume variance = 3,000 Unfav
Cost Price Variance:
Cost price variance = (Difference b/w base year rate and current year rate) x Current year (in days)(Rs. 2.38 -Rs. 2.40) x 24,000 units
Cost Price variance = 480 Unfav
Cost Volume Variance:Cost volume variance =
(Difference b/w base year days and current year) x Base year rate(25,000 units - 24,000 units) x 2.38
Cost volume variance = 2,380 fav
Revenue Mix Variance:
Formula (Difference b/w current year sales and current year mix at base year mix) x Base year G.P.
Not possible due to mix possible in single product
Final Sales Volume Variance
Average base year gross profit per unit = Total Gross profit 15,500 Total Nos. of units 25,000
Formula: (Difference b/w Total base years and Totalcurrent sales (in units)) x average base year gross profit per unit
Total nos. of units sold in base year 25000Total nos. of units sold in current year 24000
Difference 1000 UnfavAverage base year G.P 0.62
620 Unfav
(Difference b/w base year rate and current year rate) x Current year (in days)
(Difference b/w base year rate and current year rate) x Current year (in days)
Formula (Difference b/w current year sales and current year mix at base year mix) x Base year G.P.
0.62
(Difference b/w Total base years and Totalcurrent sales (in units)) x average base year gross profit per unit
1 Sales Price Variance If Favourable then "Gain due to increase in Sales price"
If Unfav. Then "Loss due to decrease in sales price"
2 Cost Price variance If Favourable then "Gain due to decrease in cost price"
If Unfav. Then "Loss due to increase in Cost price"
3 Sales Mix Variance If Favourable then "Gain due to shift in Sales mix"
If Unfav. Then "Loss due to shift in Sales mix"
4 Final Sales volume variance If Favourable then " Gain due to increase in units sold"
If Unfav. Then " Loss due to decrease in units sold"
Sales Price Variance:
Formula: Sales Price Variance Rate means Sales rate
Product X (Difference b/w Std. rate and Actual rate) x Actual units
Product Y (Difference b/w Std. rate and Actual rate) x Actual units
Product Z (Difference b/w Std. rate and Actual rate) x Actual unitsSALES PRICE VARIANCE
ORProduct Standard Actual Variance Actual
Rate Rate units
A 15 16 1 Fav 5,112
B 12 12 0 4,208
C 10 9 1 Unfav 1,105
SALES PRICE VARIANCE
Sales Volume Variance:
Formula: Sales Volume Variance Rate means Sales rate
Product X (Difference b/w Std. units and actual units) x Standard rate
Product Y (Difference b/w Std. units and actual units) x Standard rate
Product Z (Difference b/w Std. units and actual units) x Standard rate
SALES VOLUME VARIANCE
ORProduct Std. Actual Variance Standard
Units Units Rate
A 6,000 5,112 888 Unfav 15
B 3,500 4,208 708 Fav 12
C 1,000 1,105 105 Fav 10.00
SALES VOLUME VARIANCE
Cost Price Variance:
Formula: Cost Price Variance Rate means cost rate
Product X (Difference b/w Standard rate and Actual rate) x Actual units
Product Y (Difference b/w Standard rate and Actual rate) x Actual units
Product Z (Difference b/w Standard rate and Actual rate) x Actual units
COST PRICE VARIANCE
ORProduct Standard Actual Variance Actual
Rate Rate Units
A 12 13.98 1.98 Unfav 5,112
B 10 9.72 0.28 Fav 4,208
C 8.75 8.83 0.08 Unfav. 1,105
COST PRICE VARIANCE
Cost Volume Variance:
Formula: Cost Volume Variance Rate means cost rate
Product X (Difference b/w Standard units and Actual units) x Standard rate
Product Y (Difference b/w Standard units and Actual units) x Standard rate
Product Z (Difference b/w Standard units and Actual units) x Standard rate
COST VOLUME VARIANCE
ORProduct Standard Actual Variance Standard
Units Units Rate
A 6,000 5,112 888 Fav 12
B 3,500 4,208 708 Unfav 10.00
C 1,000 1,105 105 Unfav 8.75
COST VOLUME VARIANCE
If nos. of units increased (in sales) resulting increase in the cost spending
Sales Mix Variance:
Formula (Difference b/w Actual units and Actual units at std. mix ) x Standard G.P.
Product Actual Std. Actual Qty Variance Standard Unis Mix % at standard mix Gross Profit
A 5,112 57.14 5,957 845 Unfav 3.00
B 4,208 33.33 3,475 733 Fav 2.00
C 1,105 9.52 993 112 Fav 1.250
10,425 100 10,425 Sales Mix Variance
Final Sales Volume Variance
Formula: (Difference b/w standard units and Actual units) x average Standard gross profit per unit
Average standard gross profit per unit = Total Gross profit 26250Total Nos. of units 10500
Product Actual units Standard Variance Average Standard Units Gross profit per unit
A 5,112 6,000 888 Unfav 2.50
B 4,208 3,500 708 Fav 2.50
C 1,105 1,000 105 Fav 2.50
10,425 10,500 Final Sales volume varianceORFinal Sales Volume Variance:
Formula: (Difference b/w Total Standard units and Total Actual units) x average Standard Gross profit per unit
Total nos. of Standard units sold 10500Total nos. of Actual units sold 10425
Difference 75 UnfavAverage base year G.P 2.50
188 Unfav
xxxx
xxxx
xxxxSALES PRICE VARIANCE xxxx
Sales PriceVariance
5,112 Fav
-
1,105 Unfav
4,007 Fav
xxxx
xxxx
xxxx
SALES VOLUME VARIANCE xxxx
Sales VolumeVariance
13,320 Unfav
8,496 Fav
1,050 Fav
(3,774) Unfav
xxxx
xxxx
xxxx
COST PRICE VARIANCE xxxx
Cost PriceVariance
10,122 Unfav
1,178 Fav
88 Unfav.
9,032 Unfav
xxxx
xxxx
xxxx
xxxx
Sales VolumeVariance
10,656 Fav
7,080 Unfav
919 Unfav
2,657 Fav
Sales Mix Variance
2,535 Unfav
1,466 Fav
140 Fav
929 Unfav
2.50
Final Sales Volume Variance
2,220 Unfav
1,770 Fav
263 Fav
188 Unfav
(Difference b/w Total Standard units and Total Actual units) x average Standard Gross profit per unit
