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Pricing and Profitability Analysis Activity

J Corporation's gross profit decreased from 2020 to 2021 despite an increase in sales. The decrease was due to unfavorable quantity and price variances. Specifically, the net quantity variance was unfavorable by P80,000 and the net price variance was favorable by P9,360,000. For its two products, A and B, J Corporation experienced favorable variances in sales price, cost price, sales mix, and sales volume from 2020 to 2021.

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Alexis Kaye Dayag
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220 views4 pages

Pricing and Profitability Analysis Activity

J Corporation's gross profit decreased from 2020 to 2021 despite an increase in sales. The decrease was due to unfavorable quantity and price variances. Specifically, the net quantity variance was unfavorable by P80,000 and the net price variance was favorable by P9,360,000. For its two products, A and B, J Corporation experienced favorable variances in sales price, cost price, sales mix, and sales volume from 2020 to 2021.

Uploaded by

Alexis Kaye Dayag
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Pricing and Profitability Analysis Activity

The gross profit of J Corporation for 2020 and 2021 are given below:
2020 2021 Increase or ( Decrease )
Sales P8,000,000 P12,000,000 P4,000,000
Less: Cost of Sales P6,000,000 P10,800,000 P4,800,000
Gross Profit P2,000,000 P1,200,000 (P800,000)
Units Sold 50,000 48,000 (2,000)
Unit Sales Price P160.00 P250.00 P90.00
Unit Cost Price P120.00 P225.00 P105.00

1. What is the Quantity Factor variance?


Sales Quantity Variance : (2,000) x P160 (P320,000) UF

Cost Quantity Variance : (2,000) x P120 (P240,000) F


Net Quantity Variance (P80,000) UF

2. What is the Price Factor variance?


Sales Price Variance : 48,000 x P90 P4,320,000 F
Cost Price Variance : 48,000 x P105 P5,040,000 F
Net Price Variance 9,360,000 F
The contribution margin of J Corporation for 2020 and 2021 are given below:

2020 ` 2021
Sales P8,000,000 P12,000,000
Less:Variable Costs P6,000,000 P8,000,000
Contribution Margin P2,000,000 P4,000,000
The number of units sold increased by 5%.
For items 3 to 6, don’t forget to indicate whether Favorable ( F ) or Unfavorable ( UF )
3. sales price variance ratio?
P12,000,000 – P10,000,000 = P2,000,000 F
4. sales quantity variance ratio?
P10,000,000 – P8,000,000 = P2,000,000 F
5. cost price variance ratio?
CVP = 8,000,000-6,300,000 = 1,700,000 UF
CPVR = 1,700,000/6,300,000 = 26.98% UF
6. cost quantity variance ratio?
6,300,000-6,000,000 = P300,000 UF
300,000/6,000,000 = 5% UF
J Corporation presents the following data for two types of products, A and B, for 2020 and
2021:
2020 2021
Units Per Unit Amount Units Per Unit Amount
Sales:
A 8,000 P8.00 P64,000 12,000 P10.00 P120,000
B 8,000 P4.00 P32,000 20,000 P6.00 P120,000
P96,000 P240,000
Cost of goods sold
A 8,000 P6.00 P48,000 12,000 P9.00 P108,000
B 8,000 P3.00 P24,000 20,000 P5.00 P100,000
P72,000 P208,000
Gross profit 16,000 P1.50 P24,000 32,000 P1.00 P32,000
7. sales price variance?
A= (P2 x 12,000) P24,000 F
B = (P2 x 20,000) P40,000 F
Total P64,000 F
8. cost price variance?
A= (P3 x 12,000) P36,000 F
B= (P2 x 20,000) P40,000 F
Total P76,000 F
9. sales mix variance?
A= (12,000 units = P2) P24,000
B= (20,000 units = P8) P160,000
Total P184,000
Less: (P48,000) UF
Total P136,000 F
10. sales volume variance?
32,000 = P1.5 P48,000
Less: (P24,000)
Total P24,00 F

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