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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 subtract the budgeted total costs from the budgeted sales revenue:

i) Budgeted Sales Revenue = £20,900

ii) Budgeted Total Costs = £16,204

So,

$\text{Budgeted Profit} = \text{Budgeted Sales Revenue} - \text{Budgeted Total Costs} = £20,900 - £16,204 = £4,696$

Step 2

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Answer

Next, we calculate the actual profit using the actual sales revenue and actual total costs:

i) Actual Sales Revenue = £23,310

ii) Actual Total Costs = £18,226

Thus,

$\text{Actual Profit} = \text{Actual Sales Revenue} - \text{Actual Total Costs} = £23,310 - £18,226 = £5,084$

Step 3

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Answer

Now, we can determine the profit variance by subtracting the budgeted profit from the actual profit:

$\text{Profit Variance} = \text{Actual Profit} - \text{Budgeted Profit} = £5,084 - £4,696 = £388$

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