Salespersons Behavior. Don McMillan, controller of Poland Sales, has an earto-ear smile. He tosses an analysis of last year's gross margin on president Ron Poland's desk and says a soft "I told you so." Ron looks up and says, "I hope this is good news; volume is way down from the first half."

Salespersons had been paid 5 percent of sales. At midyear, Don convinced Ron to change the commission payment to 10 percent of gross margin. The analysis Don gave Ron showed an average budget month, an average month from the first half of last year, and an average month from the second half of last year. All costs are purchase prices. He used the following data:

Required:
1. Prepare an analysis similar to the one that Don probably just gave Ron, comparing an average actual month from both halves to an average budget month using gross margin variance analysis.
2. Compare the salespersons' commission results for the two time periods relative to the budget.
3. Should Ron and Don both be smiling? Comment on the salespersons' behavior.

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Budget Month Average Month-1st Half Average Month-2nd Half Products Price Cost Quantity Price Cost Quantity Price Cost Quantity Able.. $20 $10 10,000 $18 $10 12,000 $22 $10 9,000 Baker. 30 15 10,000 25 15 14,000 29 15 11,000 Charlie. 40 20 10,000 38 20 11,000 43 20 10,000