Question

In: Accounting

Boston Retail Company (clothing chain) is working with several suppliers of new and second-hand clothes. Store...

Boston Retail Company (clothing chain) is working with several suppliers of new and second-hand clothes. Store managers have the freedom to decide which supplier(s) they wants to work with and the amount and types of clothes they want to order for their stores in each season. The prices charged by each supplier are based on the price per piece of cloth and the total number of clothes ordered. A store manager first places the order with a supplier. After receiving and accepting the order, the supplier bills the store and the store pays the supplier to have the order delivered. A quality and quantity test is performed when receiving the order. After the test, the employees store and display the clothes in their store. When the clothes have been stored, staff needs to handle (e.g., check, iron, fold) each piece of the clothes so that they are in good shape and conditions. At the end of every season, the store needs to get rid of the clothes that are out of season and/or have minor damages, by disposing, recycling, or donating them.

Boston Retail Company employs both full-time and part-time employees. Each store manager is responsible for selecting and hiring employees for her own store. The full-time employees are trained shop assistants. It is not easy to recruit good full-time shop assistants and it takes at least 10 hours to train each of them, so that they can manage all aspects of the store in a professional and reliable way. Besides the full-time shop assistants, store managers can also hire part-time employees to help with selling during weekends and holidays. Most part-time employees are local college students. Each part-time employee works as 60% of a full-time employee. The part-time employees are only responsible for communications with customers and selling, without performing any other tasks (e.g., managing inventory or accounts). The turnover rate of these part-time employees is very high.

20X1 ACTUAL ($,000)

INCOME STATEMENT

Sales

$    9,200

Costs of goods sold

       4,780

Gross margin

4,420

Wages and salaries

1,530

Rent and facilities

840

Advertising

585

Administrative expenses

435

Interest

72

Depreciation

57

Training

38

Other

          54

Profit before taxes

809

Income tax

         283

Net profit

  $     526

KEY BALANCE SHEET FIGURES

DECEMBER 31, 20X1 ($,000)

Assets

Cash

$      208

Accounts Receivable

255

Inventory

985

Property, plant, and equipment

1,854

Other assets

         325

Total assets

$     3,627

Liabilities

Accounts payable

$      209

Bank loan

1,180

Stockholders ‘equity

       2,238

Total liabilities and stockholders ‘equity

$     3,627

Question:

Stores of Boston Retail Company sell two types of clothes: new and second-hand clothes. Below is the information about the expected and actual prices and selling volumes of each type. Based on this information and the information from the case, calculate the mix variance for the two types of clothes:

*For the average prices, round your numbers into two decimals. Use dot ( . ) for decimal. For the variances, only enter an integer in each of the space. *

*Put a negative sign ( - ) in front of a number (with no space in between) for negative numbers. *

New Second-hand Average
Expected price $15.00 $8.00 ????$
Actual price $15.50 $6.90 ????$
Expected quantity 500000 362500
Actual quantity 420000 389855

Solutions

Expert Solution

Below is the screenshot for Sales Mix Variance with detailed explaination.

PS: Because fof lack of clarity for which Mix variance Question is asking it is assumed that it is asking for Sales Mix Variance as the details are given for sales is suffient for the same.


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