Analyzing Results. Chavez Walkie-Talkie markets two models of its main product line. Budgeted and actual results for 1998 are as follows:

\section*{Required:}
1. Analyze the change in gross margin.
2. Analyze the change in operating expenses.
3. Identify and comment on the three main reasons for the decline in net profit.

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Sales revenue Cost of sales Gross margin... Operating expenses Net profit Units sold.... Selling price per unit Budget Actual $1,080,000 $1,120,850 756,000 829,445 $ 324,000 $ 291,405 174,000 198,000 $ 150,000 $ 93,405 Budget Actual NearBy FarAway NearBy FarAway 3,000 6,000 $166.00 $97.00 3,200 $162.25 6,300 $95.50 116.20 67.90 120.07 Cost of sales per unit 70.67 Operating expenses follow a budget formula of $10 per unit sold plus $84,000.