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Using the data in Extract F, calculate the total profit variance for Zara in 2016 - Edexcel - A-Level Business - Question 2 - 2019 - Paper 2

Question 2

Using the data in Extract F, calculate the total profit variance for Zara in 2016. You are advised to show your working.

Worked Solution & Example Answer:Using the data in Extract F, calculate the total profit variance for Zara in 2016 - Edexcel - A-Level Business - Question 2 - 2019 - Paper 2

Step 1

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Answer

To find the budgeted profit, we use the formula:

$\text{Budgeted Profit} = \text{Budgeted Sales Revenue} - \text{Budgeted Total Costs}$

Plugging in the values from the extract:

$\text{Budgeted Profit} = 20,900 - 16,204 = 4,696$

Step 2

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Answer

Next, we will calculate the actual profit using the formula:

$\text{Actual Profit} = \text{Actual Sales Revenue} - \text{Actual Total Costs}$

Inserting the actual values:

$\text{Actual Profit} = 23,310 - 18,226 = 5,084$

Step 3

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Answer

The profit variance can now be calculated as:

$\text{Variance} = \text{Actual Profit} - \text{Budgeted Profit}$

Substituting the calculated profits:

$\text{Variance} = 5,084 - 4,696 = 388$

Step 4

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Answer

Therefore, the total profit variance for Zara in 2016 is:

$\text{Total Profit Variance} = 388$

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