Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 2

Derive Amounts for Profit Variance Analysis

Aqua Clean, Inc, operates a pool cleaning service Aqua Clean wants to compare this month’s results with those for last month, which is believed to be a typical “base period” Assume that the following information is provided:

	Last Month	This Month
Number of cleanings	140	161
Revenues	$22,680	$22,800
Variable costs	4,620	5,220
Contribution margin	$18,060	$17,580

Required

Compute the flexible budget and sales activity variance and prepare a profit variance analysis (like the one in Exhibit 165 of the previous chapter) in as much detail as possible (Hint: Use last month as the master budget and this month as “actual”) What impact did the changes in number of cleanings and average revenues (ie, sales price) have on Aqua Clean’s contribution margin?

Step 1 of 4

AC Inc. provides service of pool cleaning. The company is comparing its results of this month with of the last month.

	Last month	This month
No. Of cleanings	140	161
Sales	$22,680
Std. Sales for this month
Actual sales this month		$22,800
Sales price variance		$3,282U

The sales price variance is the difference between standard sales for actual units sold on this month and the actual sales made.

The sales price variance of the company is $3,282U.