BPP Kit Sep23 – Jun24: Mock exam 1 – Question 13

A profit centre manager claims that the poor performance of her division is entirely due to
factors outside her control. She has submitted the following table along with notes from a market expert, which she believes explains the cause of the poor performance:

Sales volume
Budget this year: 500
Actual this year: 300
Actual last year: 400
The entire market has decreased by 25% compared to last year.

Sales revenue
Budget this year: $50,000
Actual this year: $28,500
Actual last year: $40,000
Rivalry in the market saw selling prices fall by 10%.

Total material cost
Budget this year: $10,000
Actual this year: $6,500
Actual last year: $8,000
As demand for the raw materials is decreasing, suppliers lowered their prices by 5%.

After adjusting for the external factors outside the manager’s control, in which
category/categories is there evidence of poor performance?
A. Material cost only
B. Sales volume and sales price
C. Sales price and material cost
D. Sales price only

I chose the D, however, the correct answer is A.
This my workings:
Sales volume should be 300 units (400 x 0.75). This is the same as actual sales volume achieved so this was not poor performance.
Sales price should be $45,000 ($50,000 x 0.9). Revenue for the year was only $28,500 so this is poor performance.
Material cost should be $9,500 ($10,000 x 0.95). Actual material purchased was only $6,500 so this is good performance.

Can you tell me where is my mistake?
Looking forward to your response,
Iniss.