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Dear Tutor,
can you please explain logic behind the following statement in official answer:
“The manager would be assessed on the controllable profit performance of the branch. If we exclude the gross margin planning variance ($19,152A) and allow that the part-time staff costs and marketing costs are controllable then we see that there is a favourable variance in controllable profit of $6,312 ($19,152 – $12,840).”
Why it was deducted $19,152 – $12,840? I don’t understand the meaning.Thank you very much in advance!
EvgeniiaThe store’s profit is showing an adverse variance of 12,840.
The planning variance suggests that the original profit budget was 19,152 too high.
So, if the actual results are 12,840 below the original budget, but that was 19,152, too high the store manager has performed well and has’ improved profits’ by 19,152 – 12,840 = 6,312 over what should have been expected.
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