Robin Wince owns a small chain of frame shops. All the frames and other merchandise the company sells is purchased by the company’s central purchasing department. A partial performance report showing the direct costs for one of Robin’s stores appears as follows:

Required: Robin is concerned even though the variance in income is zero. Because the total variance is zero, the store manager believes that there is no problem. Do you agree with the manager? Why?

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Sales Cost of Goods Sold S&A Expense Income Budget $200,000 Actual $200,000 Variance $ -0- 120,000 110,000 40,000 50,000 $ 40,000 $ 40,000 10,000 F 10,000 U -0-