henry -budget_variance assessment.docVIP

BSBFIM501A Manage Budgets Financial Plans Part A The Special Soap Company is a manufacturer and wholesaler of upmarket soap. The company markets a variety of soap but all of them are of the same size. The main ingredient in all the soaps is the same. The difference in price and quantities of the special additives used in the different variety of soaps is negligible, and therefore they are not differentiated in financial reports. You are newly appointed in the company and are responsible for producing the variance reports. You are one of the three members of ‘Production Cost Control’ team. It is your responsibility to discuss the financial results you produced with the other members of the team, the Production Manager and the Purchasing Manager of the company. The team is to devise action plans to rectify negative situations before reporting to the General Manager. You find that the variance between budgeted and actual cost of production in the financial report for the week ending 27 October 2009 is $102 (U). You identify from the budgets the following standards: Main ingredient per unit of soap 7 kg Additive per unit of soap 1 kg Main ingredient price per kg $3 Additive price per kg $9 Direct labour per unit of soap 2 hours Direct labour rate per hour $15 Overhead (all fixed) recovery rate per unit $10 Also you know a unit consists of 100 pieces of soap. For the week ending 27 October 2009, the following data applies: Actual unit price of main ingredient $2.95 Actual unit price of additive $9.20 Total cost of main ingredient $4248 Total cost of additive $1794 Actual unit price of direct labour $16 Total direct labour cost $5920 Total overhead (fixed) cost $2140 The production for the week is 200 units. Provide the following variance calculations: Main Ingredient Direct Material Price Variance: Main ingredient per unit of soap 7 kg Main ingredient price per kg $3 1 unit :7*3=$21.00 200 units : 21*200=$ 4200.00 Main Ingredient Direct Material Usage Variance: