help Exercise Score: 0 of 10 pts Assignment Score: 80% (40 of 50 pts) 4 of 5 com
ID: 2481234 • Letter: H
Question
help
Exercise Score: 0 of 10 pts Assignment Score: 80% (40 of 50 pts) 4 of 5 complete Suppose a chain of RFC franchises in Shanghai had budgeted sales for 2012 of RMB 7.7 million (where RMB stands for the Chinese unit of currency, officially the renminbi, also called the yuan) Cost of goods sold and other variable costs were expected to be 60% of sales. Budgeted annual fixed costs were RMB 2.1 million. A strong Chinese economy caused actual 2012 sales to rise to RMB 9.4 million and actual profits to increase to RMB 1,360,000. Fixed costs in 2012 were as budgeted. The franchisee was pleased with the increase in profit Read the requirements Requirement 1. Compute the sales-activity variance and the flexible-budget variance for income for 2012. What can the franchisee learn from these variances? Begin by completing the flexible budget. (Enter all amounts as positive numbers. Enter amounts in millions of Chinese RMB's. Round all answers to two decimal places. For variances with a zero balance, make sure to enter "O" in the appropriate field. If the variance is zero, do not select a label.) Actual Results at Actual Activity Level Sales Variable costs Contribution margin Fixed costs Operating income 9.40 5.64 3.76 1.88 1.88Explanation / Answer
Budget Actual Sales 7.7 9.4 COGS 4.62 5.94 Contribution margin 3.08 3.46 Fixed costs 2.1 2.1 Profit 0.98 1.36 Flexible Budget Sales 9.4 COGS 5.64 Contribution margin 3.76 Fixed costs 2.1 Profit 1.66 Sales Activity variance= (Budgeted Sales -Actual Sales)*Budgeted Contribution Margin Per Unit 3.76-3.08= 0.68 UF Flexible Budget Variance = 3.46-3.76= 0.30(UF) The franchisee should understand that the variance is not that large as projected when comparing with the fixed budget. Cost figures should be adapted as per changes to revenue levels. 2 2013 Sales 7.7 COGS 63.19% of sales 4.86563 Contribution margin 2.83437 Fixed costs 2.1 Profit 0.73437 Profits decrease to 0.734 Mn.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.