Bina Nusantara University 3 LEARNING OBJECTIVE To compute Gross Profit on Sales To make Gross Profit Statement To compute changes of gross profit To analyze Gross Profit Variance
Bina Nusantara University 4 definition Gross Profit is the excess or shortage Net Sales to Cost of Goods Sold, these changes will be analyzed. Gross Profit have the role that’s very strategic and vital for the company policy in business world. Gross Profit that be obtained can influences net income (loss) for that accounting period.
Bina Nusantara University 5 decisive factors Changes of gross profit depend on four-decisive factors, as follows : Sales Price Variance Sales Volume Variance Cost Price Variance Cost Volume Variance
Bina Nusantara University 6 Sales Price Variance Variance between Actual Sales Price with Budgeted/previous Year Sales Price. Sales Price Variance = (SP2-SP1) x SV2, + increase or – decrease Sales SP2 = Actual Sales Price SP1 = Budgeted/Previous Year Sales Price. SV2 = Actual Volume Price
Bina Nusantara University 7 Sales Volume Variance Variance between Actual Sales Volume with Budgeted/previous Year Sales Volume. Sales Volume Variance = (SV2-SV1) x SP1,+ increase or – decrease Sales SV2 = Actual Sales Volume SV1 = Budgeted/Previous Year Sales Volume. SP1 = Budgeted/Previous Year Sales Price
Bina Nusantara University 8 Cost Price Variance Variance between Actual Cost Price with Budgeted/previous Year Cost Price. Cost Price Variance = (CP2-CP1) x CV2,+ increase or – decrease COGS CP2 = Actual Cost Price CP1 = Budgeted/Previous Year Cost Price. CV2 = Actual Cost Volume
Bina Nusantara University 9 Cost Volume Variance Variance between Actual Cost Volume with Budgeted/previous Year Cost Volume. Cost Volume Variance = (CV2-CV1) x CP1, + increase or – decrease COGS CV2 = Actual Cost Price CV1 = Budgeted/Previous Year Cost Volume. CP1 = Budgeted/Previous Year Cost Price.
Bina Nusantara University 10 Example : Entah Baratah,Co Income Statement, Year 1 and 2 31/12/x1 31/12/x2 Sales 250 units @ $ 10 $ 2,500 300 units @ $ 12.5 $ 3,750 COGS $ 2,000 $ 2,250 Gross Profit ……………….. $ 500 $ 1,500
Bina Nusantara University 11 Calculation of cost/unit Year 20x1 : $ 2,000/250 units = $ 8 per unit Year 20x2 : $ 2,250/300 units = $ 7.50 per unit
Bina Nusantara University 12 Changes of Gross Profit Analysis Change of Gross Profit are caused change of sales: a. Sales Price Variance = ($ 12.5 - $10 ) x 300 units = $ 750 increase Sales Price, then increase Gross Profit b. Sales Volume Variance = (300 units -250units) x $ 10 = $ 500 increase Sales Volume, increase Gross Profit
Bina Nusantara University 13 Changes of Gross Profit Analysis Change of Gross Profit are caused change of COGS: a. Cost Price Variance = ($ 7.50 - $8.00 ) x 300 units = ( $ 150 ) decrease Cost Price, increase Gross Profit b. Cost Volume Variance = ( 300 units - 250 units) x $ 8 = $ 400 increase Cost Volume, decrease Gross Profit
Bina Nusantara University 14 Changes of Gross Profit Statement Changes of Sales are caused by : Increase Sales Price $ 750 Increase Sales Volume $ 500 + $ 1,250 Changes of COGS are caused by : Decrease Cost Price ($ 150 ) Increase Cost Volume $ 400 + $ 250 - INCREASE GROSS PROFIT $ 1,000
Bina Nusantara University 15 Comment Based on Gross Profit Analysis Statement from Khayangan, Co show increase of gross profit 300%. Increase of gross profit occurs, is caused percentage of sales increase higher than percentage of COGS increase.
Bina Nusantara University 16 CONCLUSION Changes of GROSS PROFIT Analysis can support the price strategic and planning of company. Changing on each of decisive factors determine increase or decrease on GROSS PROFIT. Changes of GROSS PROFIT determine increase or decrease on NET OPERATING INCOME