Problem:
Diego Garcia owns a chain of travel goods stores. Last year, his sales staff sold 10,000 suitcases at an average sale price of $150. Variable expenses were 80% of sales revenue, and the total fixed expenses were $110,000. This year, the chain sold more expensive product lines. Sales were 8,000 suitcases at an average price of $200. The variable expense percentage and the total fixed expenses were same the both years. Garcia evaluates the chain manager by comparing this year's income with last years income.
1. Prepare a performance report for this year. How would you improve Garcia's performance evaluation system to better analyze this year's results?
This Year Last Year
Actual Actual Variance
Sales revenue
Variable expenses
Fixed expenses
Operating income