Question
Hi I need the solution for the below problem from Managerial Accounting Balakrishnan 8.59 Profit reconciliation (LO1, LO2, LO3). Famous Footwear is a store that
Hi I need the solution for the below problem from Managerial Accounting Balakrishnan
8.59 Profit reconciliation (LO1, LO2, LO3). Famous Footwear is a store that specializes in shoes targeted to people who lead an "active life." The Chicago mega-store has a special area called the "Locker Room" that is dedicated to shoes for various sports and activities like jogging, tennis, and basketball. Budgeted profit for the Locker Room is computed using an average cost of $44 per pair of shoes and an average selling price of $80 per pair of shoes. The manager of the Locker Room has considerable discretion in setting prices and in staffing the area. Typically, the Locker Room is staffed for 700 hours per month at a budgeted wage rate of $5 per hour. In addition to this base wage, sales staff receives a commission equal to 5% of revenues. Normally, the staffing level would not be expected to change in response to "small" (defined as 610%) changes in budgeted shoe sales. For October, the Locker Room had budgeted sales of 4,000 pairs of shoes and 700 staffing hours. Actual results for October were as follows: Pairs of shoes sold 4,250 Revenue $323,000 Cost of shoes 170,000 Labor 2 commissions 16,150 Labor 2 base wages 3,000 (the actual base wage was $5 per hour) Profit $133,850 Required: a. What was the Locker Room's master budget profit and flexible budget profit for October? What was the Locker Room's total profit variance for October? b. Decompose the Locker Room's total profit variance into four numbers: (1) the sales volume variance, (2) the sales price variance, (3) the flexible budget shoe cost variance, and (4) the flexible budget labor cost variance. c. Prepar a budget reconciliation report for the Locker Room for October. Comment on the resultsin particular, what factor(s) do you believe may cause the pattern of variances?
Thanks,
Alexandre
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