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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

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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

Calculate the Budgeted Profit

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Answer

The budgeted profit can be calculated using the formula:

extBudgetedProfit=extBudgetedSalesRevenue−extBudgetedTotalCosts ext{Budgeted Profit} = ext{Budgeted Sales Revenue} - ext{Budgeted Total Costs}

Substituting the values:

extBudgetedProfit=£20,900−£16,204=£4,696 ext{Budgeted Profit} = £20,900 - £16,204 = £4,696

Step 2

Calculate the Actual Profit

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Answer

The actual profit is calculated as follows:

extActualProfit=extActualSalesRevenue−extActualTotalCosts ext{Actual Profit} = ext{Actual Sales Revenue} - ext{Actual Total Costs}

Substituting the provided figures:

extActualProfit=£23,310−£18,226=£5,084 ext{Actual Profit} = £23,310 - £18,226 = £5,084

Step 3

Calculate the Profit Variance

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Answer

The profit variance can be calculated using the formula:

extProfitVariance=extActualProfit−extBudgetedProfit ext{Profit Variance} = ext{Actual Profit} - ext{Budgeted Profit}

Substituting the calculated profits:

extProfitVariance=£5,084−£4,696=£388 ext{Profit Variance} = £5,084 - £4,696 = £388

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