Expected and Actual Sales and Profit

Expected and Actual Sales and Profit

Exhibit 3 shows that, in 2009, the Italian region had expected sales of 10,967,000 euros from ice cream and 2,232 euros from specialties. Total sales passed this projection, with the Italian region seeing sales of 11,106,000 euros from ice cream and 2,253,000 euros from specialties. These results caused favorable sales variances of 139,000 euros for ice cream and 21,000 euros for specialties, which total to a 160,000 euro favorable variance.

This favorable variance is offset by a number of unfavorable variances, mostly resulting from cost of goods sold. Exhibit 3 details these costs. After cost of goods sold is accounted for, the Italian region still has a favorable variance of 78,000 euros. After other costs and selling and administrative expenses are accounted for, the Italian region has a 58,000 euro favorable variance between actual and expected profit.

Variance Analysis

We have analyzed various variance statistics in the tables below, including sales-volume, price, and efficiency, among others.

Ice Cream

Flexible Budget

Sales-Volume

Variances

Static Budget

Unit Price

(Euros)

Volume

('000)

Euros

('000)

Volume

('000)

Euros

('000)

Unit Price

(Euros)

Volume

('000)

Euros

('000)

Sales (volume in litres)

4.471

2480

11,088

27

121

4.471

2453

10967

Cost of goods sold

Dairy ingredients (litres)

2.663

1895

5,046

31

83

2.663

1864

4963

Other ingredients (100 gr.)

1.478

1296

1,916

21

31

1.478

1275

1885

Labor (hours)

9.063

36.03

327

2.93

27

9.063

33.10

300

Total cost of goods sold

7,288

140

7148

Contribution margin

3,800

-19

3819

The table above shows a sale-volume variance analysis for ice cream in the Italian region. Changes in sales volume are responsible for a 121,000 euro favorable variance. However, unfavorable variances in cost of goods sold result in a 19,000 euro unfavorable variance in profit.

Specialties

Flexible Budget

Sales-Volume

Variances

Static Budget

Unit Price

(Euros)

Volume

('000)

Euros

('000)

Volume

('000)

Euros

('000)

Unit Price

(Euros)

Volume

('000)

Euros

('000)

Sales (volume in litres)

8.206

276

2,265

4

33

8.206

272

2,232

Cost of goods sold

Dairy

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