(Appendix 10C)Iraj Company Retails Two Grades of Persian Carpets: Grade

question 180

Essay

(Appendix 10C)Iraj Company retails two grades of Persian carpets: Grade X and Grade Y.The carpets are sold by rolls.The following is a summary of the company's activities for last year:
Required:
a)Assume the two grades of carpet are close substitutes.Calculate the sales volume variance for each grade of carpet and analyze each into a sales mix variance and a sales quantity variance.
b)Analyze the sum of the sales quantity variance into its two components: market volume variance and market share variance.
c)Comment on the appropriateness of the assumption of close substitution between the two grades of carpet.Comment also on the effect,if any,on the analysis in part a)above if this assumption is considered inappropriate.

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Definitions:

Heterotrophs

Organisms that obtain energy by consuming other living things, unable to synthesize their own food.

Peptidoglycan

A complex polymer found in the cell walls of bacteria that provides structural support and protection.

Gram-positive

Refers to bacteria that retain the crystal violet dye used in Gram staining, indicating a thick peptidoglycan layer in their cell walls.

Gram-negative

Bacteria characterized by a thin layer of peptidoglycan in their cell wall, covered by an outer membrane containing lipopolysaccharides; stains pink in Gram staining.