Expected and Actual Sales and Profit
Essay by Xiaohan Huo • April 19, 2018 • Case Study • 1,198 Words (5 Pages) • 885 Views
Expected and Actual Sales and Profit
Exhibit 3 shows that, in 2009, the Italian region had expected sales of 10,967,000 euros from ice cream and 2,232 euros from specialties. Total sales passed this projection, with the Italian region seeing sales of 11,106,000 euros from ice cream and 2,253,000 euros from specialties. These results caused favorable sales variances of 139,000 euros for ice cream and 21,000 euros for specialties, which total to a 160,000 euro favorable variance.
This favorable variance is offset by a number of unfavorable variances, mostly resulting from cost of goods sold. Exhibit 3 details these costs. After cost of goods sold is accounted for, the Italian region still has a favorable variance of 78,000 euros. After other costs and selling and administrative expenses are accounted for, the Italian region has a 58,000 euro favorable variance between actual and expected profit.
Variance Analysis
We have analyzed various variance statistics in the tables below, including sales-volume, price, and efficiency, among others.
Ice Cream
Flexible Budget
Sales-Volume
Variances
Static Budget
Unit Price
(Euros)
Volume
('000)
Euros
('000)
Volume
('000)
Euros
('000)
Unit Price
(Euros)
Volume
('000)
Euros
('000)
Sales (volume in litres)
4.471
2480
11,088
27
121
4.471
2453
10967
Cost of goods sold
Dairy ingredients (litres)
2.663
1895
5,046
31
83
2.663
1864
4963
Other ingredients (100 gr.)
1.478
1296
1,916
21
31
1.478
1275
1885
Labor (hours)
9.063
36.03
327
2.93
27
9.063
33.10
300
Total cost of goods sold
7,288
140
7148
Contribution margin
3,800
-19
3819
The table above shows a sale-volume variance analysis for ice cream in the Italian region. Changes in sales volume are responsible for a 121,000 euro favorable variance. However, unfavorable variances in cost of goods sold result in a 19,000 euro unfavorable variance in profit.
Specialties
Flexible Budget
Sales-Volume
Variances
Static Budget
Unit Price
(Euros)
Volume
('000)
Euros
('000)
Volume
('000)
Euros
('000)
Unit Price
(Euros)
Volume
('000)
Euros
('000)
Sales (volume in litres)
8.206
276
2,265
4
33
8.206
272
2,232
Cost of goods sold
Dairy
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