Tom Carroll operates a bike shop in Omaha, Nebraska. Tom budgets to earn $100,000 in revenue each month; he also expects 40% of this revenue to be from deluxe bikes and the remainder to be from standard bikes. Tom budgets for a contribution margin ratio of 40% on the deluxe bike and 30% on the standard bike. After accounting for $27,000 in fixed costs per month, Tom budgets to earn $7,000 in monthly profit. For the most recent month, Tom earned $120,000 in revenue. However, deluxe bikes only accounted for 30% of total revenue. Actual selling prices, contribution margin ratios, and fixed costs, were all as budgeted. Required: a. Calculate Tom’s total profit variance for the month. b. Decompose Tom’s total profit variance into a sales volume variance and a flexible budget variance. c. Compute the sales mix variance and the sales quantity variance, and show that they sum to the sales volume variance. d. Discuss the overall performance for Tom’s bike shop for the most recent month.

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