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  3. the following annual information is provided for claudes book store...

Question: the following annual information is provided for claudes book store...

Question details

The following annual information is provided for Claude’s Book store.

Income statement for the year 2017-2018

Claude’s Book Store

 

Budget

Actual

Variance

Sales Revenue

$206,000

$202,000

 

Cost of sales

$104,000

$101,000

 

 

 

 

 

Marketing expenses:

 

 

 

Advertising

$3,500

$4,500

 

Administration expenses:

 

 

 

Salaries and wages

$95,000

$85,000

 

Rent of shop

$8,000

$8,500

 

Electricity

$2,500

$2,200

 

Telephone

$1,200

$1,200

 

Financial expenses:

 

 

 

Interest paid

$200

$300

 

Total operating expenses

 

 

 

Net Profit

 

 

 

Required:
a) Complete the table above to:
• calculate variances, and
• determine whether they are favourable or unfavourable.


You have been asked to keep track of the variance for Claude’s Book Store into the next year.
You have confirmed the following figures (actual) for the first quarter of 2018-2019:
• Sales revenue: $50K
• Cost of sales: $27K
• Advertising: $1,250.00
• Telephone: $330.00

Required:
b) Assuming the budget for the year 2018-2019 stayed the same, calculate the new variances for the figures above.
c) Draft a short report addressed to the client to confirm your findings and state whether the new variances are favourable or unfavourable for the business. Ask for advice from the client on how they think the variances can be addressed.

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