Management Services by Luzviminda S.

Payongayong
Y2006 edition

CHAPTER 4

Gross Profit Analysis

Multiple Choice
1a

P150,000 F
120,000 UF

Price Current year's sales

volume

Adjusted Sales

Last Year's sales

2a

P56,000 F

TYP X TYTQ X TYM =

12.00
20,000
0.45
9.00
20,000
0.45
5.00
4,000
0.09
44,000
1.00

P28,000 UF

X
Y
Z

TYP x
9.00
7.50
4.00

GROSS PROFIT
QUANTITY
VARIANCE

x 150,000

P750,000.00

LYP x TYQ
P720000
180,000

x 150,000

600,000.00

LYP x LYQ
P720,000
180,000

x 180,000

720,000.00

Current year's sales

X
Y
Z

3c

TYP x TYQ
P750,000
150,000

Adjusted Sales I
TOTAL
SALES
240,000.00
180,000.00
20,000.00
440,000.00

Current year's cost of sales

TOTAL
TYTQ x TYM =
SALES
20,000
0.45
180,000.00
20,000
0.45
150,000.00
4,000
0.09
16,000.00
44,000
1.00
346,000.00
94,000.00
Adjusted Sales II

LYP X TYQ X
TYM =
10.00
20,000
0.45
8.00
20,000
0.45
6.00
4,000
0.09
44,000
1.00

ADJUSTED
SALES I
200,000.00
160,000.00
24,000.00
384,000.00

Adjusted Cost of Sales I

LYP x
8.00
7.00
4.50

TYQ x
TYM =
20,000
0.45
20,000
0.45
4,000
0.09
44,000
1.00

ADJUSTED
SALES I
160,000.00
140,000.00
18,000.00
318,000.00
66,000.00

Last year's sales

TOTAL

1 339447946.xlsx

TOTAL

Management Services by Luzviminda S. Payongayong

Y2006 edition
ADJ S I - ADJ. SA II
18,181.82
14,545.45
2,181.82
34,909.09

Quantity Variance
Adj. COS I Adj. COS I
14,545.45
12,727.27
1,636.36
28,909.09

F
F
F
F

X
Y
Z

LYP X LYTQ X TYM =

10.00
15,000
0.45
8.00
20,000
0.45
6.00
5,000
0.09
40,000
1.00

SALES
181,818.18
145,454.55
21,818.18
349,090.91

LYP X LYTQ X
TYM =
10.00
15,000
0.38
8.00
20,000
0.50
6.00
5,000
0.13
40,000
1.00

Adjusted COS II

UF
UF
UF
UF

4b

6,000.00 F
P6,000 F

5a

P2,500 F

6d

( P27,216)

X
Y
Z

Adjusted Cost of Sales I

LYC x TYTQ x TYM =

8.00
15,000
0.45
7.00
20,000
0.45
4.50
5,000
0.09
40,000
1.00

GROSS PROFIT

SALES
150,000.00
160,000.00
30,000.00
340,000.00

TOTAL
COS
145,454.55
127,272.73
16,363.64
289,090.91

LYC x
8.00
7.00
4.50

LYQ x
LYM =
15,000
0.38
20,000
0.50
5,000
0.13
40,000
1.00

60,000.00

Sales this year

Sales this year at last year's prices
Decrease in sales due to change in price
Sales TY at LYP
Sales last year
Increase in the sales due to change in volume
Change in volume
33,600 / 420,000
or
P453,600 / P420,000
=

2 339447946.xlsx

ADJUSTED
SALES I
120,000.00
140,000.00
22,500.00
282,500.00
57,500.00

P426,384.00
(453,600.00)
(27,216.00) UF

(P426384 / 94%)

=
108%

P453,600.00
420,000.00
33,600.00
8%

Management Services by Luzviminda S. Payongayong

Y2006 edition
sales this year is 1.08% of last year.
7c

P13,154.40

Cost this year

Cost this year at last year's cost
P243,600 x 108%
Increase in cost due to change is cost price

P276,242.40
263,088.00
13,154.40 UF

8c

P19,488

Cost this year at last year's cost

Cost Last year
Increase in cost due to change in volume

P263,088.00
243,600.00
19,488.00 UF

9a

8% increase

see number 6

10 b

5% increase

Change in cost price /

% change

11 b

P20,000

12 a

P70,000

Cost this year at LYC

P13,154.40
263,088
or
P276,248.40 /
263,088
=
* cost this year is 105% of last year
Sales this year
Sales this year at last year's prices
13 Increase in sales due to change in price

=
1.05 or 105%

P1,237,500.00
(1,100,000.00)
137,500.00 F

(P1,237,500 /1.125%)

Sales TY at LYP
Sales last year
Increase in the sales due to change in volume
14 c

13 c

10%

P137,500

14 Change in volume
P100,000 / P1,000,000
or
P1,100,000 / P1,000,000
=
sales this year is 1.10% of last year.
Cost this year
Cost this year at last year's cost
P800,000 x 1.10%
12 Increase in cost due to change is cost price

3 339447946.xlsx

5%

P1,100,000.00
(1,000,000.00)
100,000.00
=

10%

110%

P950,000.00
(880,000.00)
70,000.00 UF

Management Services by Luzviminda S. Payongayong

Y2006 edition
Cost this year at last year's cost
Cost Last year
Increase in cost due to change in volume

P880,000.00
(800,000.00)
80,000.00 UF

15 a

7.955%

Change in cost price

P70,000 / 880,000
or
P950,000 / 800,000
= 1.07955

16 d

P84,000 favorable

2003 Actual sales

1 30,000 x (P225,000 / 22,500) =
2 30,000 x (P240,000 / 30,000) =
3 6,000 x (P45,000 / 7,500) =
Sales Price factory - favorable

300,000.00
240,000.00
36,000.00

2003 Actual cost of sales

1 30,000 x (P180,000 / 22,500) =
2 30,000 x (P210,000 / 30,000) =
3 6,000 x (P33,750 / 7,500) =
Cost of Sales factor - unfavorable

240,000.00
210,000.00
27,000.00

17 b

P42,000 unfavorable

18 b

P1.50

660,000.00

576,000.00
84,000.00
519,000.00

2003 Average Gross Profit at 2002 prices and costs:

(P576,000 - P477,000) / 66,000

19 a

P8,625 Favorable

2002 Average gross profit per unit (P510,000 - P423,750) / 60,000 =

x increase in units sold (66,000 - 60,000)
Quantity factor - favorable

20 b

P4,125 favorable

2003 Average gross profit at 2002 prices and costs

2002 Average gross profit per unit (P510,000 - P423,750) / 60,000
Increase in gross profit per unit
x 2003 units sold
Sales mix factor - favorable

4 339447946.xlsx

7.955%

477,000.00
42,000.00

1.50
1.4375
6,000
8,625
1.5000
1.4375
0.0625
66,000
4,125.00

Management Services by Luzviminda S. Payongayong

Y2006 edition

P150,000 F

120,000 UF

price
variance
40,000.00 F
20,000.00 F
(4,000.00) UF
56,000.00 F

cost
variance
20,000.00 UF
10,000.00 UF
(2,000.00) F
28,000.00 UF
28,000.00 F

Mix

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Management Services by Luzviminda S. Payongayong

Y2006 edition
Variance
31,818.18 F
(14,545.45) UF
(8,181.82) UF
9,090.91 F

Mix
variance
25,454.55 UF
(12,727.27) F
(6,136.36) F
6,590.91 UF
2,500.00 F

UF

6 339447946.xlsx

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Y2006 edition

7 339447946.xlsx

Management Services by Luzviminda S. Payongayong

Y2006 edition

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Management Services by Luzviminda S. Payongayong

Y2006 edition

CHAPTER 4

Gross Profit Analysis

PROBLEMS
4.1
solutions:
Sales
Cost of Sales
Gross Profit
Units sold
Selling price per unit
Cost of sales per unit

Y2015
194,250.00
100,270.00
93,980.00
18,500
10.50
5.42

1 Using the two factor method

Current Year's Sales
2008 Sales x 2008 Quantity
10.50 x
18,500.00

Y2014
175,000.00
105,000.00
70,000.00
17,500
10.00
6.00

194,250.00

Adjusted Sales
2007 Price x 2008 Quantity
10.00 x

18,500.00

Last Year's Sales

2007 Price x 2007 Quantity
10.00 x
17,500.00
Change in sales
Current Year's Cost of Sales
2008 Cost of Sales x 2008 Quantity
5.42 x
18,500.00
Adjusted Cost of Sales
2007 Cost x 2008 Quantity
6.00 x

185,000.00

175,000.00

100,270.00

18,500.00

111,000.00

Last Year's Cost of Sales

2007 Price x 2007 Quantity
6.00 x
17,500.00
Change in Cost of Sales
CHANGE IN GROSS PROFIT

105,000.00

2 Using the three factor method:

Accounting for change in sales:
Price:
(P10.50 - P10.00) x 17,500
Quantity:
(18,500-17,500) x 10.00
Quantity-price:
(P10.50 - P10.00) x (18,500 - 17,500)

9 339447946.xlsx PROBLEMS

8,750.00
10,000.00
500.00

Management Services by Luzviminda S. Payongayong

Y2006 edition
change in gross profit due to change in sales

19,250.00

Accounting for change in cost of sales:

Cost
(P5.42 - P6.00) x 17,500
Quantity:
(18,500-17,500) x 6
Quantity-price:
(P5.42- P6.00) x (18,500 - 17,500)
Change in gross profit due to change is cost of sales
CHANGE IN GROSS PROFIT

(10,150.00)
6,000.00
(580.00)
(4,730.00)
23,980.00

4.2
solutions:
Sales
Cost of Sales
Gross Profit
Units sold
Selling price per unit
Cost of sales per unit

Year 2
891,000.00
688,500.00
202,500.00
81,000
11.00
8.50

Year 1
840,000.00
945,000.00
(105,000.00)
105,000
8.00
9.00

Accounting for change in sales:

Price:
(P11.00 - P8.00) x 105,000
Quantity:
(81,000-105,000) x 8.00
Quantity-price:
(P11.00 - P8.00) x (81,000 - 105,000)
change in gross profit due to change in sales

315,000.00
(192,000.00)
(72,000.00)
51,000.00

Accounting for change in cost of sales:

Cost
(P8.50 - P9.00) x 105,000
Quantity:
(81,000-105,000) x 9
Quantity-price:
(P8.50- P9.00) x (81,000 - 105,000)
Change in gross profit due to change is cost of sales
CHANGE IN GROSS PROFIT

(52,500.00)
(216,000.00)
12,000.00
(256,500.00)
307,500.00

4.3
solutions:
Sales

Y2015
1,305,000.00

10 339447946.xlsx PROBLEMS

Y2014
1,160,000.00

Management Services by Luzviminda S. Payongayong

Y2006 edition
Cost of Sales
Gross Profit
using the two factor method:

843,900.00
461,100.00

696,000.00
464,000.00

unit cost decreased by 3%

Compute first the change is cost of sales:

Cost factor:
Cost of Sales this year
843,900.00
Less, Cost of sales this year at last year's cost
P843,900/97%
870,000.00
Change in cost of sales due to change in unit cost - unfavorable
(26,100.00)
Quantity factor
Cost of Sales this year at last year's cost
870,000.00
Less, Cost of Sales last year
696,000.00
Change in sales due to change in volume = FAV
174,000.00
NET CHANGE IN COST OF SALES - UNFAVORABLE
147,900.00
Based now on the above, the quantity changes could be determined as an increase of 25% as it showed
an increase in cost of sales this year at last year's cost. Thus change in sales can be computed using the change
in volume, as any change in volume of sales will also be the change in cost at quantity sold is common to sales and cost

To compute for the changes in sales:

Price factor:
Sales this year
Less, sales this year at last year's selling prices
1,160,000 x 1.25
Change in sales due to change in selling price -unfavorable

1,305,000.00
1,450,000.00
(145,000.00)

Quantity factory
Sales this year at last year's selling prices
Less, Sales last year
Change in sales due to change in volume - favorable
NET CHANGE IN SALES - FAVORABLE
NET CHANGE IN GROSS PROFITM - UNFAVORABLE

1,450,000.00
1,160,000.00
290,000.00
145,000.00
(2,900.00)

4.5
Y2015
yellow soap
black soap
totals

units
15,000
30,000
45,000

usp
20.00
8.00

ucp
12.00
3.93

sales
300,000.00
240,000.00
540,000.00

cost of sales
180,000.00
117,900.00
297,900.00

Y2014
yellow soap
black soap
totals

units
18,750
27,000
45,750

usp
18.00
8.40

ucp
12.60
4.00

sales
337,500.00
226,800.00
564,300.00

cost of sales
236,250.00
108,000.00
344,250.00

(24,300.00)

(46,350.00)

TOTAL CHANGES

(750.00) decrease

Price factor

11 339447946.xlsx PROBLEMS

Management Services by Luzviminda S. Payongayong

Y2006 edition
Sales this year
Sales this year at last year's prices
yellow soap
15,000
18.00
black soap
30,000
8.40
45,000
favorable
Cost factor
Cost of Sales this year
Cost of Sales this year at last year's cost
yellow soap
15,000
12.60
black soap
30,000
4.00
45,000
favorable

540,000.00
270,000.00
252,000.00
522,000.00
18,000.00

297,900.00
189,000.00
120,000.00

Quantity factor
Units sold this year at last year's average gross profit
45,000 x P4.80984
Last year's gross profit
favorable
Average gross profit =
220,050.00 / 45,750 =
Sales mix factor
This year's gross profit at last year's price and cost
522,000.00 309,000.00
Units sold this year at last year's average gross profit
45,000.00 x
4.80984
favorable
Increase ( Decrease) in Gross Profit

12 339447946.xlsx PROBLEMS

309,000.00
11,100.00

216,442.62
220,050.00
(3,607.38)
4.80984

213,000.00
216,442.62
(3,442.62)
22,050.00

Management Services by Luzviminda S. Payongayong

Y2006 edition

change
19,250.00 favorable
(4,730.00) favorable
23,980.00 favorable

9,250.00 favorable

10,000.00 favorable

19,250.00 favorable

(10,730.00) favorable

6,000.00 favorable

(4,730.00) favorable
23,980.00 favorable

favorable
favorable
favorable

13 339447946.xlsx PROBLEMS

Management Services by Luzviminda S. Payongayong

Y2006 edition
favorable

favorable
unfavorable
favorable
favorable
favorable

change
51,000.00
(256,500.00)
307,500.00
(24,000.00)
3.00
(0.50)

favorable
favorable
favorable
increased
decreased

favorable
unfavorable
unfavorable
favorable

favorable
unfavorable
favorable
favorable
favorable

change
145,000.00 favorable

14 339447946.xlsx PROBLEMS

Management Services by Luzviminda S. Payongayong

Y2006 edition
147,900.00 unfavorable
(2,900.00) unfavorable

26,100/870,000

(0.03)

174,000/696,000

0.25

rease of 25% as it showed

be computed using the change
tity sold is common to sales and cost.

145,000/1,450,000

(0.10)

290,000/1,160,000

0.25

gross profit
120,000.00
122,100.00
242,100.00
gross profit
101,250.00
118,800.00
220,050.00
22,050.00

15 339447946.xlsx PROBLEMS

Management Services by Luzviminda S. Payongayong

Y2006 edition

16 339447946.xlsx PROBLEMS

Management Services by Luzviminda S. Payongayong

Y2006 edition
4.5
products
yellow soap
black soap
Totals

Y2008
Sales

Price
variance

300,000.00
240,000.00
540,000.00

Adjusted
sales I

30,000.00
(12,000.00)
18,000.00

Quantity
Variance

270,000.00
252,000.00
522,000.00

(4,500.00)
(4,200.00)
(8,700.00)

Actual Sales
yellow
black
Adjusted sales I
yellow
black

TYP
20.00
8.00

x
x
x

x
x
x

15,000
30,000

TYM
./
./

45,000
45,000

.=
.=

x
x
x

TYQ
45,000
45,000
.
TYQ
45,000
45,000

LYP
18.00
8.40

x
x
x

15,000
30,000

TYM
./
./

45,000
45,000

.=
.=

LYP
18.00
8.40

x
x
x

LYQ
45,750
45,750

x
x
x

15,000
30,000

TYM
./
./

45,000
45,000

.=
.=

LYP
18.00
8.40

x
x
x

LYQ
45,750
45,750

x
x
x

18,750
27,000

LYM
./
./

45,750
45,750

.=
.=

Adjusted sales II
yellow
black
Budgeted Sales
yellow
black

products
yellow soap
black soap
Totals

Y2008
Cost
180,000.00
117,900.00
297,900.00

cost
variance
(9,000.00)
(2,100.00)
(11,100.00)

4 339447946.xlsx Sheet3

Adjusted
Cost I
189,000.00
120,000.00
309,000.00

Quantity
Variance
(3,150.00)
(2,000.00)
(5,150.00)

Management Services by Luzviminda S. Payongayong

Y2006 edition
Actual Sales
TYC
yellow
12.00
black
3.93
Adjusted sales I
LYC
yellow
12.60
black
4.00

x
x
x

x
x
x

15,000
30,000

TYM
./
./

45,000
45,000

.=
.=

x
x
x

TYQ
45,000
45,000
.
TYQ
45,000
45,000

x
x
x

15,000
30,000

TYM
./
./

45,000
45,000

.=
.=

LYC
12.60
4.00

x
x
x

LYQ
45,750
45,750

x
x
x

15,000
30,000

TYM
./
./

45,000
45,000

.=
.=

LYC
12.60
4.00

x
x
x

LYQ
45,750
45,750

x
x
x

18,750
27,000

LYM
./
./

45,750
45,750

.=
.=

Adjusted sales II
yellow
black
Budgeted Sales
yellow
black

TOTAL VARIANCE IN QUANTITY & MIX

CHANGE IN GROSS PROFIT - UNFAVORABLE

4 339447946.xlsx Sheet3

(3,550.00)

Management Services by Luzviminda S. Payongayong

Y2006 edition
Adjusted
Sales II
274,500.00
256,200.00
530,700.00

Mix
Variance
(63,000.00)
29,400.00
(33,600.00)

Y2007
Sales
337,500.00
226,800.00
564,300.00

300,000.00
240,000.00
540,000.00
270,000.00
252,000.00
522,000.00

18,000.00 FAV

274,500.00
256,200.00
530,700.00

(8,700.00) UF

337,500.00
226,800.00
564,300.00

(33,600.00) UF

(24,300.00) UF
Adjusted
Cost II
192,150.00
122,000.00
314,150.00

Mix
Variance
(44,100.00)
14,000.00
(30,100.00)

Y2007
cost
236,250.00
108,000.00
344,250.00

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Management Services by Luzviminda S. Payongayong

Y2006 edition
180,000.00
117,900.00
297,900.00
189,000.00
120,000.00
309,000.00

(11,100.00) UF

192,150.00
122,000.00
314,150.00

(5,150.00) UF

236,250.00
108,000.00
344,250.00
(3,500.00)

(30,100.00) UF

(46,350.00) UF
22,050.00 UF

4 339447946.xlsx Sheet3