Performance report

SUPPOSE THAT FOR 20X1 A PARTICULAR STORE BUDGETED REVENUE OF $220,000, A 10% INCREASE OVER THE CURRENT REVENUE OF $200,00. THE ACTIONS LISTED IN EXIBIT 1-2 RESULTED IN SIX NEW BUDGETED PRODUCTS AND A TOTAL ADVERTISING BUDGET OF $15,000. ACTUAL RESULTS WERE

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NEW DRINKS 7

ADVERTISING $15,500

REVENUES $228,000
1) PREPARE A PERFORMANCE REPORT USING THE FORMAT OF EXB. 1-3
2) NET INCOME WERE NOT AVAILABLE UNTIL SEVERAL MONTHS AFTER THE STORE IMPLEMENTED THE PLAN. THE NET INCOME RESULTS WERE DISAPPOINTING TO MANAGEMENT BECAUSE THE PROFITS ACTUALLY DECLINED EVEN THOUGH REVENUES INCREASED. WHY? BECAUSE THE COST INCREASED BY MORE THAN REVENUES. LIST SOME FACTORS THAT MIGHT HAVE CAUSED COSTS TO INCREASE SO MUCH AND THAT MANAGEMENT MAY NOT HAVE CONSIDERED WHEN FORMULATED THE STORE’S PLAN.

EXIBIT 1-3
BUDGET ACTUAL VARIANCE
SALES $50,000 $50,000 0

less: $22,000 $24,000 $2,500 U
Store labor $12,000 11,000 400 F
Other labor 6,000 6,050 50 U
Utilities,maintenance 4,500 4,500 0

Total expenses $44,500 46,600 $2,150 U

Total operating income 5,000 3,350 2,150 U