P1 Section A: (30 Marks) The Senior has been reviewing the performance of the company's retail stores. As a result of this review and after market research, SMT decided to upgrade the retail stores and to launch a specialist gait analysis service. A rolling programme of store upgrades began on the 1 December 2021. SMT feels that the gait analysis will persuade some customers to move from our casual range to the performance range. By March 2022, the store upgrade programme is progressing well and the sales of running shoe ranges are increasing as a result. You receive the following email: From: Ben Numa, Finance Manager To: Finance Officer (You) Subject: Sales variances Good day Finance Officer (You) The upgrade of our two largest stores was completed by the end of January 2022. Store 1 is in Keyland, and Store 8 is in Newland. The Senior Management Team (SMT) has asked for a report on the sales performance for running shoes for both stores February 2022 to see the impact of the upgrade, the new gait analysis service and promotions that occurred (details of which are in the attached notes). Because we have three distinct ranges for both our Hill and Flat running shoes (Basic, Regular and Elite), Emily Queda, Finance Director has suggested that it would be useful to consider the variances on the basis of total sales of running shoes split across Basic, Regular and Elite Attached are Table 1 and Table 2 (Appendix 1) showing the sales variances for Store 1 and Store 8, together with some notes. Please prepare a report to the SMT which explains: Requirement 1: DISCUSS what the variances shown in Table 1 and Table 2 tell us about the sales performance of Store 1 and Store 8 in February, giving possible reasons why the variances have occurred. Requirement 2: DISCUSS what possible impact the recent changes may have had. (25 marks) Regards, Ben Numa Appendix 1: Sales variances prepared by Ben Numa, Finance Manager Table 1: Sales variances for all running shoe ranges for Store 1 for February 2022 Sales price Sales mix profit 1,200 A 3,867 A 4,950 A 5,777 A 3,500 F 16,128 F 2,650 A 6,484 F Sales quantity profit 16,637 F Table 2: Sales variances for all running shoe ranges for Store 8 February 2022 Sales price Sales mix profit 390 A 5,941 F 940 A 5,160 A 600 A 4,368 A 1,930 A 3,587 A Sales quantity profit 5,546 F (5marks) Notes: 1. The sales mix profit and sales quantity profit variances have been calculated using the individual units method. The variances were calculated using the same standard selling prices, costs and profits per pair of shoes in each store. The Basic range has the lowest profit per pair and the Elite range has the highest profit per pair. 2. Store 1 and Store 8 have the same budgeted quantity and sales mix for running shoes, as each other. 3. Store 1 is located in Keyland's capital city in an area close to offices. Store 8 is in the capital city on Newland and is located close to the city's university. 4. In the first 2 weeks of February 2022 and unplanned 10% discount was available on all purchases of running shoes. This was not included in the budget. 5. In January 2022, the fitness social influence, Kieran Lim, posted a photograph of himself wearing a pair of our Basic running shoes. Kieran is from Newland and has over 2million followers on social media. 6. As part of promoting the new in-store facilities, the world champion hill runner Tracy Robinson was launched as the new face of our Elite Hill running shoe range. Tracy is from Keyland and made a promotional appearance in Store 1 at the start of February. A new design of the Elite Hill running shoe, endorsed by Trace, was launched at the same time.