SEMINAR 2 SALES PERFORMANCE MANAGEMENT R.F.

RAMOS

I
The comparative statement of gross profit of the Claiborne Company for the years ending December
31, 2017 and 2018 is as follows:

2017 2018
Net sales 150,000 210,000
Cost of sales 132,000 164,000
Gross profit 18,000 46,000

A general increase of 5% was made on all selling prices effective January 1, 2018. At the same time, a
new plant manager was engaged who did much during the year in reducing plant costs.

An argument arose between the plant manager and the vice-president in charge of sales at the end of
2018. They agreed that three factors in all increased the gross profit, but the plant manager insists that
the savings in manufacturing costs were greater in amount than the increase in gross profit due to
increased volume of sales, while the vice-president is equally insistent that the opposite is true.

Required
You are asked to calculate the amount of increase in gross profit attributable to each of the factors
separately, i.e., (a) selling price, (b) cost, and (c) volume of sales.

II
Tony Company shows you the following data for 2018:

2017 2018
Net sales 192,500 210,210
Cost of sales 115,500 165,400
Gross profit 77,000 44,810

The unit selling price decreased by 22 per cent.

Required:

1. Compute the amount of increase in gross profit attributable to (a) selling price, (b) cost, and
(c) quantity.
2. Compute the per cent change in
a. Volume
b. Unit costs

III
The controller of MHA Inc. is examining the following budgeted and actual income statements for its
principal product for 19x5. All amounts are in thousands of pesos:

Budget Actual
Sales 4,800.0 4,967.2
Variable costs 1,680.0 1,780.8
Contribution margin 3,120.0 3,186.4

1
The budgeted unit selling price is P8.00 Actual unit volume is 6% over budget, but the actual selling
price is below budget. Per unit variable costs are incurred as budgeted.

Required
Determine the sales price variance and sales volume variance based on contribution margin.

IV
KINGSCOURT INNS, a large motel chain, had revenues of P60 million in 2017, operating at a 70%
occupancy rate. In 2018, Kingscourt raised its room rates by 5%, and its occupancy rate fell to 65%.
Variable costs are negligible.

Required
1. Determine Kingscourt’s revenue for 2018.
2. Determine how much of the difference in revenue, from 2017 to 2018, is attributable to (a)
room rates and (b) room occupancy. You can treat 2017 in the same way you usually do with
“budgeted results”, and 2018 as you do “actual results”. Round to the nearest P100,000.

V
The next year's budget for Green, Inc., a multi-product company, is given below:

Product A Product B
Sales 1,890,000 1,377,000
Variable costs 926,100 596,700
Fixed costs 500,000 500,000
Net income 463,900 280,300
Units 252,000 108,000

At the end of the year, the total fixed costs and the variable costs per unit were exactly as budgeted,
but the following units per product line were sold. Green analyzes the effects its sales variances have
on the profitability of the company.

Product line Units Sales (P)

A 253,230 1,848,579
B 113,770 1,479,010

Required:
1. Compute the sales price variance for each product.
2. Compute the sales volume variance for each product.
3. Compute the sales mix variance for each product.
4. Compute the sales quantity variance for each product.
5. Compute the market share and industry volume variance for each product assuming the
following information.

Market Shares
Product Actual Budget
A 15.0% 12.5%
B 17.0% 20.0%