Blake Industries sells security systems and monitoring services to commercial clients. Blake regularly prepares variance analyses of customer profitability. Recently, it discovered that one of its largest clients purchased more security products and monitoring services than Blake had budgeted, and that Blake had received a larger share of this business than it had expected. The client was less costly to service than Blake had expected, resulting in a favorable cost spending variance. Nonetheless, the total profit variance associated with this customer was unfavorable. The variance results suggest that:
A) The customer demanded and received large price discounts from Blake.
B) The customer made an unusual number of requests for service on the systems installed by Blake.
C) Invoicing costs associated with this customer were greater than budgeted.
D) This customer was paid a larger number of sales calls from Blake's staff than the company had budgeted.

Question

Quizplus · Accepted Answer

Given the information, the unfavorable total profit variance despite higher sales volume, a larger market share than expected, and a favorable cost spending variance suggests that the price discounts given to the customer were significant enough to offset these positive factors, leading to an overall unfavorable profit variance.

Blake Industries Sells Security Systems and Monitoring Services to Commercial