Steve Park, president and principal stockholder of Pelican Instruments, Inc., sat at his desk reflecting on the 2017 results (Table 1). For the second year in succession, the company had exceeded the profit budget. Steve Park was obviously very happy with the 2017 results. All the same, he wanted to get a better feel for the relative contributions of the R&D, manufacturing, and marketing departments in this overall success. With this in mind, he called his assistant, a recent graduate of a well-known business school, into his office.

"Amy," he began, "as you can see from our recent financial results, we have exceeded our profit targets by $622,000. How is analysis showing how much R&D, manufacturing, and marketing contributed to this overall favourable profit variance?"

TABLE 1

Pelican Instruments, Inc. - Income Statement for the Year 2017

TABLE '1 Pelican Instruments, Inc. Income Statement for the Year 2017 Sales Cost of Goods Sold Gross Margin Less: Other Operating Expenses Marketing R&D Administration Prot before Taxes Budget $1,356 $1,436 $1,346 316,37 2 3,663 T204 $ 4,6?6 2,623 Actual $1,440 3 932 31,6?4 $17366 3,665 1196 $ 4,646 3,156 Actual 16% 9% Planned Actual Firm-wide fixed expenses (1,000s) Fixed manufacturing expenses $3,872 $3,530 Fixed marketing expenses 1,856 1,440 Fixed administrative expenses 1,340 1,674 Fixed R&D expenses 1,480 932 (exclusively for electronic instruments)Additional Information Electric Electronic Meters Instruments (EM) (El) Selling prices per unit: Average standard price $40.00 $180.00 Average actual prices, 201? 30.00 Variable product costs per unit: 205-00 Average standard manufacturing cost $20.00 $50.00 Average actual manufacturing cost 21.00 54.00 Volume information: Units produced and soldactual 141,770 62,1?2 Units produced and soldplanned 124,800 66,000 Total industry sales, 20'1Yactual $44 million $?6 million Total industry variable product costs, 201?actua| $16 million $32 million United's share of the market ('34: of physical units}: Planned 10% 15%