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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. Selected financial information for Zara 201... show full transcript

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

To find the budgeted profit, subtract the budgeted total costs from the budgeted sales revenue:

extBudgetedProfit=extBudgetedSalesRevenue−extBudgetedTotalCosts=20,900−16,204=4,696 ext{Budgeted Profit} = ext{Budgeted Sales Revenue} - ext{Budgeted Total Costs} = 20,900 - 16,204 = 4,696

Step 2

Calculate the Actual Profit

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

extActualProfit=extActualSalesRevenue−extActualTotalCosts=23,310−18,226=5,084 ext{Actual Profit} = ext{Actual Sales Revenue} - ext{Actual Total Costs} = 23,310 - 18,226 = 5,084

Step 3

Calculate the Variance

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

extVariance=extActualProfit−extBudgetedProfit=5,084−4,696=388 ext{Variance} = ext{Actual Profit} - ext{Budgeted Profit} = 5,084 - 4,696 = 388

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