Fundamentals of Cost Accounting 2nd Edition by William Lanen, Carolyn Wells, Michael Maher

Exercise 26

Derive Amounts for Profit Variance Analysis
Aqua Clean, Inc., operates a pool cleaning service. Aqua Clean wants to compare this month's results with those for last month, which is believed to be a typical "base period." Assume that the following information is provided:

Required
Compute the flexible budget and sales activity variance and prepare a profit variance analysis (like the one in Exhibit 16.5 of the previous chapter) in as much detail as possible. ( Hint: Use last month as the master budget and this month as "actual.") What impact did the changes in number of cleanings and average revenues (i.e., sales price) have on Aqua Clean's contribution margin