Phil Brooks, president of Woodside Products. Inc., called Marilyn Mynar into his office one morning in early July 1993. Ms. Mynar was a business major in college and was employed by Woodside during her college summer vacation. "Marilyn." Brooks began, "I've just received the preliminary financial statements for our 1993 fiscal year, which ended June 30. Both our board of directors and our shareholders will want, and deserve, an explanation of why our pretax income was virtually unchanged even though revenues were up by $363,000.

Question
Prepare the detailed analysis of the $ 1,954 profit increase from fiscal 1992 to fiscal 1993 and draft an explanation for Woodside's board of directors, as requested by Phil Brooks. For the board's report, you may make any reasonable conjectures you wish as to what caused the variances you have calculated. For both years, assume that inventory was valued at $55 per unit. Assume also that none of the members of the board of directors has expertise in accounting calculations or terminology.

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EXHIBIT 1 Operating Results for the Years Ended June 30 1993 58,646,750 5,255,388 3,391,362 2,039,343 $1,352,019 1992 $8,283,750 4,846,875 3,436,875 2,086,810 51,350,065 Sales revenues Cost of sales Gross margin Selling and administrative costs Income before taxes Other 1992 Data Other 1993 Data 1. Sales 88,125 units @ $94. 2. Cost of sales 88,125 units @ $55 3. Selling and administrative costs were 54.42 per unit 1. Sales 82,350 units @ $105 2. Cost of sales includes 1993 production cost variances. 3. Selling and administrative costs were $4.70 per variable selling cost plus $1,697,298 fixed S&A. 4. Production volume and sales volume were equal. 5. Production costs per unit were unit variable selling cost plus $1,652,298 4. Production volume was 81,100 units; standard 5. 626,200 pounds of material @ $2.90 were 6. 64,860 direct labor-hours were worked 7. Actual variable overhead costs were $359,500. fixed S&A. volume was 88,125 units. consumed by production. @ $16.80 Materials Direct labor Variable overhead4.00 Fixed overhead 19.00 $20.00 12.00 (8 lbs. @ $2.50) (0.75 hr.@ $16.00) (per unit) (based on long-term std. volume of 88,125 units) 555.00