Compute the sales-activity variance and the flexible-budget

Assignment Help Financial Management

Reference no: EM132055363

Suppose a chain of KFC franchises in Shanghai had budgeted sales for 2012 of RMB 7.1 million (where RMB stands for the Chinese unit of currency, officially the renminbi, also called the yuan). Cost of goods sold and other variable costs were expected to be 65% of sales. Budgeted annual fixed costs were RMB 1.4 million. A strong Chinese economy caused actual 2012 sales to rise to RMB 9.3 million and actual profits to increase to RMB 1,550,000. Fixed costs in 2012 were as budgeted. The franchisee was pleased with the increase in profit.

1. Compute the sales-activity variance and the flexible-budget variance for income for 2012. What can the franchisee learn from these variances?

2. Suppose that in 2013 the Chinese economy weakened, and the franchise's sales fell back to the RMB 7.1 million level. Given what happened in 2012, what do you expect to happen to profits in 2013 ?

Reference no: EM132055363

Questions Cloud

What is the value of the warrant : The price of the bond is €500. What is the value of the warrant?

What do you think their perspective is on your topic : Complete your webtext and then answer all of the following questions. What is your position on the topic, and why have you chosen that position?

The difference between exercise and physical activity : What is the difference between exercise and physical activity? List two examples of each and discuss what makes them an exercise vs. a physical activity.

What sorts of things would dry heat : What sorts of things would dry heat/incineration be a better method than moist heat for?

Compute the sales-activity variance and the flexible-budget : Compute the sales-activity variance and the flexible-budget variance for income for 2012. What can the franchisee learn from these variances?

Are eukaryotic organisms always multi-cellular : Name and describe the theory that explains how eukaryotic cells arose. What are some pieces of evidence that support this theory?

Record the interest accrued on the note as of december : Record the receipt of a note on November 1, 2013 for a $100,000 loan to a new tenant. Record the interest accrued on the note as of December 31, 2013

Explain the principles of jainism : Summarize the meaning as you understand it and by quoting a small portion and adding any comments or reflections on what you read.

Write one page essay on given topic : Students are required to keep a journal to free write about their thoughts, experiences, and observations, as prompts for discussion and writing assignments.

User Account

All Pages