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Analysis of Variation in Gross Profit

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by

Rean Cayanpat

on 5 May 2015

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Transcript of Analysis of Variation in Gross Profit

Gross Profit Variance Analysis
Gross Profit difference between sales and cost of goods sold

The actual Gross Profit during a given period may be compared with any of the following:

a. the immediately preceding period's figures or any figures selected as the base for comparison.

b. the same period's budgeted or standard figures.
Changes in gross profit may be attributed to the change in any, or a combination of the following factors:

Selling price(s) of the product(s)
Volume or Quantity of product(s) sold which in turn, may be due to change in:
a. number physical units sold
b. product mix or sales mix which refers to the composition of the products sold
Cost of the product sold
a. for merchandising firms, cost refers to the net purchase cost of the product
b. for manufacturing firms, cost includes the three manufacturing cost elements,namely, materials, labor, and factory overhead
Procedures for Analyzing Gross Profit Variations
Different ways of analyzing Gross Profit Variances

4 - way analysis
6 - way analysis
3 - way analysis
4 - way analysis
Sales Variance:
Sales Price Factor:
19B Sales xx
Less: 19B Sales @ 19A Sales Price xx xx
Sales Volume Factor:
19B Sales @ 19A Sales Price xx
Less: 19A Sales xx xx xx

Cost Variance:
Cost Price Factor:
19B Cost of Sales xx
Less: 19B Cost of Sales @ 19A cost price xx xx
Cost Volume Factor:
19B Cost of Sales @ 19A cost price xx
Less: 19B Cost of Sales xx xx xx
xx
Simplified Form:
4 - Way Analysis
Sales Variance:
Price Factor = Difference in selling price x 19B units .
Volume or Quantity = Difference in units x 19A selling price
Factor
Cost Variance:
Price Factor = Difference in selling price x 19B units .
Volume or Quantity = Difference in units x 19A cost price
Factor
3 - Way Analysis

Sales Variance:
Volume or Quantity = Difference in units x 19A Gross Profit per unit
Price Factor = Difference in selling prices x 19B units .
Cost Factor = Difference in cost price x 19B units

Gross Profit Variance for two or more Products
GOAL!
Analysis of Variation in Gross Profit
19B - Actual
19A - Budgeted
Standard
6 - Way Analysis
Sales Variance:
Price Factor = Difference in selling price x 19A units .
Volume or Quantity = Difference in units x 19A selling price
Factor
Price-volume Factor = Difference in selling price x Difference in units
Cost Variance:
Price Factor = Difference in cost price x 19A units .
Volume or Quantity = Difference in units x 19A cost price
Factor
Price-volume Factor = Difference in cost price x Difference in units
19B - Actual
19A - Budgeted
Standard
Sales Mix Variance:
19B units @ 19A sales price xx
Less 19B units @ 19A cost prices xx
Difference xx
Less: 19B units @ 19A average Gross profit xx
Sales Mix Variance xx
Final Sales Volume Variance:
19B units @ 19A ave. Gross Profit xx
Less: 19A Gross Profit xx
Final Sales Volume Variance xx
19B - Actual
19A - Budgeted
Standard
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