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During October, Company A had actual sales of €195,000 compared to budgeted sales of €180,000. Actual...

During October, Company A had actual sales of €195,000 compared to budgeted sales of €180,000. Actual cost of sales was €136,500, compared to a budget of €135,000. Monthly operating expenses, budgeted at €25,000, totalled €28,000. Interest expense of €2,500 incurred during February but had not been included in the budget. The performance report for October would show a net profit variance of

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Answer #1

Calculation of budgeted net profit :

Budgeted sales = €180000

Less : Actual cost of sales = €135000

Less : Monthly operating expenses = €25000

Budgeted net profit = €20000

Calculation of actual net profit :

Actual sales = €195000

Less : Actual cost of sales = €136500

Less : Actual monthly operating expenses = €28000

Less : Interest Expense = €2500

Actual net profit = €28000

Net profit variance = Actual net profit - Budgeted net profit

= €28000 - €20000 = €8000 Favorable

The performance report for October would show a net profit variance of €8000.

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