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Cost of goods sold/Sales d. Cost of goods sold/Net income

Gross Profit Variance Analysis

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2. The variance that arises solely because the actual units sold differs from the budgeted units to be sold. a. sales price variance c. sales mix variance b. sales volume variance d. none of the above 3. In a multi-product company, the sales volume variance can be divided into what variances? a. mix and production volume c. sales price and sales volume b. sales mix and sales quantity d. sales volume and sales quantity 4. A cost variance of zero indicates that the manufacturing management was a. unable to keep production costs at budgeted costs b. able to control production cost below budgeted costs c. able to control production costs at budgeted costs d. unable to keep production costs at budgeted costs even if the purchasing department was able to keep the budgeted price. Presented below is a major portion of the income statements of KTA Inc. for 2009 and 2010: 2009 2010 Sales P80,000 P97,200 Cost of Sales 50,000 72,000 Gross Margin P30,000 P25,200 The company sold its sole product for P8/unit during 2009. Even though the sales units increased by 20% during 2010, the gross margin declined. Disappointed with the results, the owner asked for your assistance in analyzing the cause of the gross margin decline. 5. The increase (decrease) in gross margin due to the change in units sold must be a. (P4,800) c. P16,000 b. P6,000 d. P26,000 6. The increase (decrease) in gross margin due to the change in sales price must be a. P1,000 c. (P4,800) b. P1,200 d. P17,200 7. The increase (decrease) in gross margin due to the change in unit cost must be a. P10,000 c. P12,000 b. (P12,000) d. (P22,000) 8. The percentage increase (decrease) in sales price must be a. 1.25% c. 2.125% b. (1.25%) d. (2.125%) 9. The percentage increase (decrease) in unit cost must be a. 20% c. 44% b. (20%) d. (44%) DAM Corporation has the following gross profits for 2010 and 2011: 2011 2010 Sales P810,000 P792,000 Cost of Sales 480,000 464,000 Gross Profit P330,000 P328,000 Sales price was 10% lower during 2011. The decrease in gross profit due to decrease in selling price must be a. P72,000 c. P81,000 b. P79,200 d. P90,000 10. The sales volume variance must be a. P63,000 U c. P108,000 F b. P90,000 F d. P108,000 U 11. The increase (decrease) in quantity sold must be a. (7.95%) c. 13.33% b. 12.00% d. 13.64% 12. The change in gross profit due to change in cost price must be a. P39,680 F d. P63,290 F b. P47,290 F e. P63,290 U c. P47,290 U Page 1 of 3

13. The change in gross profit due to change in quantity sold must be a. P42,710 U d. P63,290 U b. P44,710 F e. P108,000 F 14. The percent of increase (decrease) in cost price must be a. 8.97% d. 9.85% b. (8.97%) d. (9.85%) Presented below are data taken from the records of JAP. Corporation: Sales Cost of Sales Product Budgeted Actual Budgeted Actual J P450,000 P458,000 P270,000 P274,800 A 180,000 186,900 108,000 96,120 P 25,000 55,800 15,000 27,900 Total P655,000 P700,700 P393,000 P398,820 Quantity Product Budgeted Actual J 45,000 45,800 A 30,000 26,700 P 5,000 9,300 Total 80,000 81,800 15. The sales price variance must be a. P5,820 F c. P36,000 F b. P9,700 F d. P36,700F 16. The sales volume variance must be a. P0 c. P9,700 F b. P5,820 F d. P36,000F 17. The cost price variance must be a. P0 c. P36,000F b. P5,820F d. P36,700F 18. The cost volume variance must be a. P5,820 F c. P9,000 F b. P5,820 U d. P9,000 U 19. The sales mix variance must be a. P2,015 F d. P5,895 F b. P2,015 U e. answer not given c. P3, 880 F 20. The final sales volume must be a. P3,880 F d. P5,895 U b. P3,880 U e. P33,985 U c. P5,895 F 21. The change in gross profit due to change in units sold must be a. P2,015 F d. P15,520 F b. P3,880 F e. P36,000 F c. P3,880 U Additional Problems: [I] Presented below are the budgeted gross profit and the current year gross profit of Aburido Company: Budgeted Current Year Actual Sales P245,000 P288,000 Cost of Sales (147,000) (192,800) Gross Profit P 98, 000 P 95 ,200 The company sold only 9,000 units of its sole product during the current year out of the 10,000 units budgeted. The management would like to know the other factors aside from the decreased sales volume that caused the unfavorable gross profit variance. Required: Prepare the following: [a] 3 Way Analysis of Gross Profit Variance; [b] 4 Way Analysis of Gross Profit Variance; [c] 6 Way Analysis of Gross Profit Variance [II] The comparative income statements of Coco Company for the years ended December 31, 2011 and 2012 were given below: 2011 2012 Sales P600,000 P690,000 Cost of Sales (400,000) (390,000) Gross Profit P200,000 P300,000 Expenses (100,000) (150,000) Income P100,000 P150,000 The companys sole product was sold during 2012 for 125% of its selling price in 2011. Required: Prepare the following: [a] 3 Way Analysis of Gross Profit Variance; [b] 4 Way Analysis of Gross Profit Variance

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[III] The management of Lugi Company is worried about the decrease in gross profit for the year 2012 despite a recorded increase in sales volume of 25% in its sole product. The management engaged an accountant to explain what caused the decline in gross profit. The comparative income statements of Coco Company for the years ended December 31, 2011 and 2012 were given below: 2011 2012 Difference Sales P900,000 P 1,080,000 180,000 increase Cost of Sales (500,000) ( 750,000) 250,000 increase Gross Profit P400,000 P 330,000 70,000 decrease The accountant was required to submit a report containing the breakdown of the variances to ascertain what department to interrogate. Required: Prepare the following [a] Way Analysis of Gross Profit Variance; [b] 4 Way Analysis of Gross Profit Variance [IV] CostCut Companys operations during 2012 resulted to a higher gross profit than that of 2011. One of the major reasons is the noted decrease in the production cost of its sole product by 22.50%. The companys sales for 2011 and 2012 were P620,000 and P950,000 respectively. Cost of sales for 2011 and 2012 were P400,000 and P380,000 respectively. Required: Prepare the following: [a] 3 Way Analysis of Gross Profit Variance; [b] 4 Way Analysis of Gross Profit Variance; [c] Compute for the percent increase or decrease in selling price. [V] The comparative income statements of Bex Company for the years ended December 31, 2011 and 2012 were given below: 2011 2012 Sales P700,000 P770,000 Cost of Sales (420,000) (441,000) Gross Profit P280,000 P329,000 Expenses (100,000) (150,000) Income P180,000 P179,000 The companys sole product was sold during 2012 at a selling price higher by 25% over that of 2011. Required: Compute for the following figures: [a] Percent increase (decrease) in sales volume in 2012; [b] Percent increase (decrease) in unit cost in 2012; [c] Volume variance; [d] Net increase (decrease) in gross profit as a result of cost variances; [e] Net increase (decrease) in gross profit as a result of sales variances [VI] The comparative income statements of Ulit Company for the years ended December 31, 2011 and 2012 were given below: 2011 2012 Sales P600,000 P690,000 Cost of Sales (400,000) (390,000) Gross Profit P200,000 P300,000 Expenses (100,000) (150,000) Income P100,000 P150,000 The selling price of the companys sole product decreased by 20%. Required: Prepare a 4 -way analysis of the gross profit variance. [VII] The management of Ulitlugi Company is worried about the decrease in gross profit for the year 2012 because of the recorded decrease in sales volume of 10% in its sole product. The management engaged an accountant to explain what caused the decline in gross profit. The comparative income statements of Coco Company for the years ended December 31, 2011 and 2012 were given below: 2011 2012 Difference Sales P900,000 P 1,080,000 180,000 increase Cost of Sales (500,000) ( 750,000) 250,000 increase Gross Profit P400,000 P 330,000 70,000 decrease The accountant was required to submit a report containing the breakdown of the variances to ascertain what department to interrogate. Required: Prepare a 4 -Way Analysis of Gross Profit Variance

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