FS ANALYSIS - involves the evaluation of the firm's past performance, present condition, and

business potentials. The analysis provides information about the following, among others:
1. Profitability of the business firm
2. Ability to meet company obligations
3. Safety of investment in the business
4. Effectiveness of management in running the firm
FINANCIAL STATEMENTS (FS) ANALYSIS TOOLS AND TECHNIQUES
1. Horizontal analysis (trend or index analysis)
2. Vertical analysis
3. Financial ratios
4. Gross profit variation analysis
5. Cash flow analysis
HORIZONTAL ANALYSIS
Horizontal or index analysis involves comparison of figures shown in the financial statements of
two or more consecutive periods. The difference of the amount between two periods is
calculated, and the percentage change from one period to the next is computed using the earlier
period as the base.
Most Recent Value − Base Period Value
Percentage Change (Δ%) =
Base Period Value
Comparisons can be made between an actual amount compared against a budgeted amount,
with the 'budget' serving as the base or pattern of performance.
LIMITATION: if a negative or a zero amount appears in the base year, percentage change
cannot be computed.
VERTICAL ANALYSIS
Vertical analysis is the process of comparing figures in the financial statements of a single
period. It involves conversion of figures in the statements to a common base. This is
accomplished by expressing all figures in the statements as percentages of an important item
such as total assets (in the balance sheet) or net sales (in the income statement). These
converted statements are called common-size statements or percentage composition
statements.
Percentage composition statements are used for comparing:
1. Multiple years of data from the same firm
2. Companies that are different in size
3. Company to industry averages
RATIO ANALYSIS
Ratio analysis involves development of mathematical relationships among accounts in the
financial statements. Ratios calculated from these statements provide users and analysts with
relevant information about the firm's liquidity, solvency, and profitability.
BASIC RULES ON RATIO CALCULATIONS

• When calculating a ratio using balance sheet numbers only, the numerator and
denominator should be from the same balance sheet date. The same is true for ratios
using only income statement numbers. Exception: Calculation of growth ratios
• If an income statement account and a balance sheet account are both used to calculate a
ratio, the balance sheet account should be expressed as an average for the time period
represented by the income statement account.
• If the beginning balance of a balance sheet account is not available, the ending balance
is normally used to represent the average balance of the account.
 • If sales and/or purchases are given without making distinction as to whether made in cash
or on credit, assumptions are made depending on the ratio being calculated:
1. Turnover ratios: Sales and purchases are made on credit.
2. Cash flow ratios: Sales and purchases are made in cash.
• Generally, the number of days in a month or year is not critical to the analysis: a year may
have 360 days, 52 weeks, and 12 months; alternatively, a year may be comprised of 365
calendar days, 300 working days or any appropriate number of days.
FINANCIAL RATIOS
TESTS OF LIQUIDITY (Liquidity refers to the company's ability to pay its current liabilities as they
fall due)

Current Ratio (Banker's Ratio) 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠 It is a measure of adequacy of

(Working Capital Ratio)
Quick Ratio (Acid Test Ratio)
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 working capital. It is the
primary test of solvency to
meet current obligations from
current assets.
𝑄𝑢𝑖𝑐𝑘 𝐴𝑠𝑠𝑒𝑡𝑠 It measures the number of
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 times that the current liabilities
could be paid with the
available cash and near-cash
assets (i.e. cash, current
receivables and marketable
securities).

Working Capital Activity Ratios (Efficiency Ratios)

Receivables Turnover 𝑁𝑒𝑡 (𝐶𝑟𝑒𝑑𝑖𝑡) 𝑆𝑎𝑙𝑒𝑠 It is the time required to

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠 complete one collection cycle
from the time receivables are
recorded, then collected, to
the time new receivables are
recorded again

Average Age of Receivables 360 𝐷𝑎𝑦𝑠 It indicates the average

(Average Collection Period) 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 number of days during which
(Days' Sales in Receivables) the company must wait before
receivables are collected.

Inventory Turnover 𝐶𝑜𝑠𝑡 𝑜𝑓 𝑆𝑎𝑙𝑒𝑠 It measures the number of

Average Age of Inventory*
(Inventory Conversion Period)
(Days' Sales in Inventory)
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 times that the inventory is
replaced during the period.
360 𝐷𝑎𝑦𝑠 It indicates the average
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 number of days during which
the company must wait before
the inventories are sold.

Raw Materials Turnover 𝐶𝑜𝑠𝑡 𝑜𝑓 𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙𝑠 𝑈𝑠𝑒𝑑

WIP Turnover
Finished Goods Turnover
Normal Operating Cycle
Trade Payables Turnover
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑅𝑎𝑤 𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙𝑠 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
𝐶𝑜𝑠𝑡 𝑜𝑓 𝐺𝑜𝑜𝑑𝑠 𝑀𝑎𝑛𝑢𝑓𝑎𝑐𝑡𝑢𝑟𝑒𝑑
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑊𝐼𝑃 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
𝐶𝑜𝑠𝑡 𝑜𝑓 𝐺𝑜𝑜𝑑𝑠 𝑆𝑜𝑙𝑑
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐹𝑖𝑛𝑖𝑠ℎ𝑒𝑑 𝐺𝑜𝑜𝑑𝑠 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
Average Age of Inventory + Average Age of Receivables
𝑁𝑒𝑡 (𝐶𝑟𝑒𝑑𝑖𝑡) 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑟𝑎𝑑𝑒 𝑃𝑎𝑦𝑎𝑏𝑙𝑒𝑠
 Average Age of Trade 360 𝐷𝑎𝑦𝑠 It indicates the length of time
Payables (Payable Deferral 𝑃𝑎𝑦𝑎𝑏𝑙𝑒𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 during which payables remain
Period) (Days' Purchases in unpaid.
Payables)

Current Assets Turnover Cost of Sales + Operating It measures the movement

Expenses** / Average Current and utilization of current
Assets assets to meet operating
requirements.

* In some accounting and finance texts, average inventory age is also called as the average sales
period.
** These exclude depreciation, amortization and other expenses related to long-term assets.
TESTS OF SOLVENCY (Solvency refers to the ability of company to pay its debts)
These ratios involve leverage ratios. 'Leverage' refers to how much of company's resources are
financed by debt and/or preferred equity, both of which require fixed payment of interests and
dividends.

Times Interest Earned 𝐸𝐵𝐼𝑇 It determines the extent to

𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒 which operations cover
interest expense.

Debt-Equity Ratio 𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 Proportion of total assets

𝑇𝑜𝑡𝑎𝑙 𝑆𝑡𝑜𝑐𝑘ℎ𝑜𝑙𝑑𝑒𝑟 ′ 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦 provided by creditors
compared to that provided by
owners.

Debt Ratio 𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 Proportion of assets provided

𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 by creditors
Equity Ratio 𝑇𝑜𝑡𝑎𝑙 𝑆𝑡𝑜𝑐𝑘ℎ𝑜𝑙𝑑𝑒𝑟 ′ 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦 Proportion of assets provided
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 by owners

TEST OF PROFITABILITY

Return on Sales 𝐼𝑛𝑐𝑜𝑚𝑒 Determines the portion of

𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 sales that went into
company's earnings
Return on Assets 𝐼𝑛𝑐𝑜𝑚𝑒 Efficiency with which assets
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐴𝑠𝑠𝑒𝑡𝑠 are used to operate the
business

What INCOME figure should be used?

• If the intention is to measure operational performance, income is expressed as before

interest and tax; alternatively, income before “after-tax” interest may be used to exclude
the effect of capital structure.
• If the intention is to evaluate total managerial effort, income is expressed after interest and
tax
• The practice of expressing income after interest but before tax is now being discouraged.
• Income should include dividends and interest earned if the said investments are included
in asset base.
• If used in the DuPont technique, income must be after interests, taxes and preferred stock
dividends.
Return on Equity = Return on Sales × Assets Turnover x Equity Multiplier
Return on Equity 𝐼𝑛𝑐𝑜𝑚𝑒 Measures the amount of
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐸𝑞𝑢𝑖𝑡𝑦 net income earned by
each common share
Earnings per Share 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 − 𝑃𝑟𝑒𝑓𝑒𝑟𝑟𝑒𝑑 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠 Measures the amount of
𝑊𝑡𝑑. 𝐴𝑣𝑒. 𝐶𝑜𝑚𝑚𝑜𝑛 𝑆ℎ𝑎𝑟𝑒𝑠 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 net income earned by
each common share

MARKET TESTS

Price-Earnings (P/E) Ratio 𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑆ℎ𝑎𝑟𝑒 It indicates the number of

𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑆ℎ𝑎𝑟𝑒 pesos required to buy P 1 of
earnings.

Dividend Yield 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑒𝑟 𝑆ℎ𝑎𝑟𝑒 Measures the rate of return in

𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑆ℎ𝑎𝑟𝑒 the investor's common stock
investments.

Dividend Pay-Out 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑒𝑟 𝑆ℎ𝑎𝑟𝑒 It indicates the proportion of

𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑆ℎ𝑎𝑟𝑒 earnings distributed as
dividends.

OTHER MEANINGFUL RATIOS

RATIOS USED TO EVALUATE LONG-TERM FINANCIAL POSITION OR STABILITY

Fixed Assets to Total 𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠 Measures the

Equity 𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦 proportion of owner’s
equity to fixed assets.
Indicative of over or
under investment by
owners and
weakness in trading
on the equity*

Fixed Assets to Total 𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠 (𝑛𝑒𝑡) Indicates possible

Assets 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 over expansion of
plant and equipment.

Sales to Fixed Assets 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 Tests roughly the

(Plant Turnover) 𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠 (𝑛𝑒𝑡) efficiency of
management in
keeping plant
properties employed
Book Value Per 𝐶𝑜𝑚𝑚𝑜𝑛 𝑆𝑡𝑜𝑐𝑘ℎ𝑜𝑙𝑑𝑒𝑟 ′ 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦 Measures
Share – Common 𝐶𝑜𝑚𝑚𝑜𝑛 𝑆ℎ𝑎𝑟𝑒𝑠 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 recoverable amount
Stock by common
stockholders in the
event of liquidation if
assets are realized at
their book values
Times Preferred 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝐴𝑓𝑡𝑒𝑟 𝑇𝑎𝑥𝑒𝑠 It indicates ability to
Dividend Earned 𝑃𝑟𝑒𝑓𝑒𝑟𝑟𝑒𝑑 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠 provide dividends to
preferred
stockholders

Capital Intensity 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 Measures efficiency

Ratio 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 of the firm to generate
sales through
 employment of its
resources.

Times Fixed Charges 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝐵𝑒𝑓𝑜𝑟𝑒 𝑇𝑎𝑥𝑒𝑠 𝑎𝑛𝑑 𝐹𝑖𝑥𝑒𝑑 𝐶ℎ𝑎𝑟𝑔𝑒𝑠 Measures ability to
Earned 𝐹𝑖𝑥𝑒𝑑 𝐶ℎ𝑎𝑟𝑔𝑒𝑠 + 𝑆𝑖𝑛𝑘𝑖𝑛𝑔 𝐹𝑢𝑛𝑑 𝑃𝑎𝑦𝑚𝑒𝑛𝑡 ∗∗ meet fixed charges

TESTS OF OVER-ALL SHORT-TERM SOLVENCY OR SHORT-TERM FINANCIAL POSITION

Working Capital Turnover 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 Indicates adequacy of
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 working capital to support
operations (sales)

Defensive Interval Ratio 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 Measures coverage of

𝐶𝑎𝑠ℎ 𝑎𝑛𝑑 𝐶𝑎𝑠ℎ 𝐸𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡𝑠 current liabilities

Payable Turnover 𝑁𝑒𝑡 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠 Measures efficiency of the

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑃𝑎𝑦𝑎𝑏𝑙𝑒
Fixed Assets to Long-term 𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠
Liabilities 𝐿𝑜𝑛𝑔 𝑡𝑒𝑟𝑚 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
company in meeting the
accounts payable
Reflects extent of the
utilization of
resources from long-term
debt. Indicative of sources
of additional funds

RATIOS INDICATIVE OF INCOME POSITION

Rate of Return on Average 𝐼𝑛𝑐𝑜𝑚𝑒 Measures the profitability
Current Asset 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠 of current assets invested
Operating Profit Margin 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡 Measures profit
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 generated consideration
of operating costs.

Cash Flow Margin 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝑎𝑠ℎ 𝐹𝑙𝑜𝑤𝑠 Measures the ability of the
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 firm to translate sales to
cash

GROSS PROFIT VARIANCE

Analysis of variation in gross profit is an indispensable tool in controlling operations; the adequacy
or inadequacy of gross profit determines the final results of operations (net income). Gross profit
must be adequate to cover operating expenses, financing, income taxes and a desired amount of
profit. At times, the gross profit figure is also being used as a basis for performance evaluation

Sales = Sales Volume x Unit Selling Price

- Cost of Goods Sold = Sales Volume x Unit Cost
Gross Profit = Sales Volume x (Unit Selling Price - Unit Cost)

GROSS PROFIT VARIANCE ANALYSIS

The gross profit (GP) variance analysis is viewed as a modified form of FS analysis (i.e., trend
analysis). GP variance may be analyzed though the following:
• GP (Actual) vs. GP (Budget)
• GP (Current Period) vs. GP (Last Period)

Gross profit variance = GP (Actual) - GP (Budget)

Favorable: If actual (current) GP is greater than budgeted (last year) GP
Unfavorable: If actual (current) GP is less than budgeted (last year) GP
Analysis:

Sales Price (factor) variance = A Q x Δ SP

Cost Price (factor) variance = A Q x Δ Unit Cost
Volume (factor) Variance = Δ Q x BGP / u
Sales Volume Variance = Δ Q x Budgeted SP
Cost Volume Variance = Δ Q x Budgeted Unit Cost
__________________________________________________________________________
ACITIVITY #1 VERTICAL AND HORIZONTAL ANALYSIS

Following are the financial statements of Ann Company:

ANN COMPANY
Condensed Statement of Financial Position
December 31, 2023 (In thousands)

ASSETS LIABILITIES AND STOCKHOLDERS'

EQUITY
Cash 750 Current Liabilities 500
Non-cash current 1,250 Long-term Debts 1,000
Fixed Assets 3,000 Capital Stock 1,500
Retained Earnings 2,000
TOTAL ASSETS 5,000 TOTAL LIAB & SHE 5,000

For 2022: Net sales, P 1,600; CGS, P 1,000; Operating Expenses, P 300; Interests and tax
charges, P 200.
For 2023: Net sales, P 2,000; CGS, P 1,300; Operating Expenses, P 300; Interests and tax
charges, P 220.

REQUIRED:
1. Prepare 2023 common-size balance sheet and determine:
a. Current ratio
b. Debt ratio
c. Equity ratio
2. Prepare 2023 common-size income statement and determine:
a. Gross Profit Margin
b. Operating Profit Margin
c. Net Profit Margin
3. Compute trend percentages or prepare index analysis, for the following:
a. Net Sales
b. EBIT
c. Net Income

__________________________________________________________________________
ACITIVITY #2 LIQUIDUITY ANALYSIS
Indicate the effects of each of the following transactions on the company's (A) current ratio and
(B) acid-test ratio. There are three possible answers: (+) increase, (-) decrease, and (0) no
effect. Before each transaction takes place, both ratios are greater than 1 to 1.

Effects on
Transactions Current Ratio Acid-Test Ratio
1. Buy inventory on account.
2. Pay an account payable.
3. Borrow cash on a short-term
loan.
4. Issue long-term bonds payable.
5. Collect an account receivable.
6. Record accrued expenses
payable.
7. Sell a plant asset for cash at a
profit.
 8. Sell a plant asset for cash at a
loss.
9. Buy marketable securities, for
cash.
10. Sell merchandise on credit.
____________________________________________________________________________
ACITIVITY #3 FINANCIAL RATIOS
LYN has 1,000,000 common shares outstanding. The price of the stock is P 8. LYN declared
dividends per share of P 0.10. The balance sheet at the end of 2022 showed approximately the
same amounts as that at the end of 2023. The financial statements for LYN Merchandising are
as follows:

LYN Company, Income Statement for 2023 (in thousands)

Sales P 4,700
Cost of Goods Sold 2,300
Gross Profit 2,400
Operating Expenses:
Depreciation 320
Others 1,230 1,550
Income before interest & taxes P 850
Interest Expense 150
Income before taxes P 700
Income taxes 280
Net Income P 420

LYN Company, Balance Sheet at December 31, 2023 (in thousands)

ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY
Cash P 220 Accounts payable P 190
Accounts Receivable 440 Accrued expenses 180
Inventory 410 Total Current Liabilities P 370
Total Current Assets P 1,070
Long-term Debts 1,960
PPE 5,600 Common Stock 1,810
Accumulated Depreciation (2,100) Retained Earnings 430
TOTAL ASSETS P 4,570 TOTAL LIAB & SHE P 4,570

REQUIRED: (round-off answers to two decimal places)

1. Current ratio
2. Acid-test ratio
3. Accounts receivable turnover
4. Inventory turnover
5. Gross profit margin
6. Operating profit margin
7. Return on Sales
8. Return on Equity
9. Earnings per Share (EPS)
10. P/E Ratio
11. Dividend Yield
12. Payout Ratio
13. Debt Ratio
14. Debt-Equity Ratio
15. Times Interest Earned
_______________________________________________________________________
ACITIVITY #4 CONSTRUCTION OF FINANCIAL STATEMENTS
The following information is available concerning WWW Company's expected results in 2023 (in
thousands of pesos). Turnovers are based on year-end values.
REQUIRED: Compute for the missing items.

Return on sales 6%
Gross profit percentage 40%
Receivables turnover 5 times
Inventory turnover 4 times
Current Ratio 3:1
Ratio of total debt to total assets 40%

Condensed Income Statement

Sales P 900
Cost of Sales ???
Gross Profit ???
Operating Expenses ???
Net Income ???

Condensed Balance Sheet

Cash P 30 Current Liabilities P ???
Receivables ??? Long term debt ???
Inventory ??? Total Liabilities P ???
Total Current Assets P ???

PPE 670 Common Stock P ???

TOTAL ASSETS P ??? TOTAL LIAB & SHE P ???

____________________________________________________________________________
ACITIVITY #5 GROSS PROFIT ANALYSIS WITH SINGLE PRODUCT

Nadal Company prepared the following budgetary information for January of 2023 for its toy gun:

Sales (12,000 units) P 432,000

Cost of Goods Sold (288,000)
Gross Profit 144,000

In January, actual operations resulted in the production and sale of 13,000 units at an average
selling price of P 34 per unit. The cost of goods sold per unit increased by P 3.

REQUIRED:
1. Overall Gross Profit Variance
2. Sales Price Variance
3. Sales Volume Variance
4. Cost Price Variance
5. Cost Volume Variance