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Question

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actual profit in the shoe department of Dillard's Department Store

for the month of June:

...................................................Budget.............Actual..............Difference

Sales .........................................$680,000........$672,000.....($8,000)

merchandise..................330,000..........325,000........5,000

staff ................120,000...........123,000........(3,000)

profit......................$230,000.........$224,000.......($6,000)

in sales and expenses. Do you believe it would be useful to

investigate either or both of the increases in expenses?

method of separating mixed costs? Do you believe it would be widely

selected over the regression method in practice today? Why or why

not?

Explanation / Answer

A.% increase = Difference amount / Budgeted ValueFor sales, the increase = 75,000/600,000 = 12.5%In the same ways the increase for sales and expenses isIncrease in Sales 12.5%Increase in cost of merchandise 25.0%Increase in salaries 13.3%Looking at the percentages, it would be useful to investigate the increase in expenses only. The reason is that the increase in expenses is a higher percentage than the increase in sales which implies that expenses are rising much more than they should be given

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