Variance Analysis
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Material variances Value Remarks Veneer Standard price (SP) 30 Standard qunatity (SQ) 500 Actual price (AP) 28 Actual Quantity (AQ) 700 -1400 6000 Wood Standard price (SP) 5 Standard qunatity (SQ) 15300 Actual price (AP) 6.5 Actual Quantity (AQ) 15500 23250 1000 Rack Insert Standard price (SP) 5 Standard qunatity (SQ) 2700 Actual price (AP) 3 Actual Quantity (AQ) 2700 -5400 0 Packaging Standard price (SP) 7.5 Standard qunatity (SQ) 2700 Actual price (AP) 7.6 Actual Quantity (AQ) 2800 280 750 Material Price variance 16730 Material qty variance 7750 Input to catalogue product Vineer Price variance (AQ*(AP-SP)) Veneer Quantity variance (SP*(AQ-SQ)) Input to deluxe product Wood Price variance (AQ*(AP-SP)) Wood Quantity variance (SP*(AQ-SQ)) Common to both product Rack Price variance (AQ*(AP-SP)) Rack Quantity variance (SP*(AQ-SQ)) Common to both product packaging Price variance (AQ*(AP-SP)) packaging Quantity variance (SP*(AQ-SQ))
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variance
Transcript of Variance Analysis
varainces
Material variancesLabour variancesOverheads variancesValueRemarksValueRemarksValueRemarksVeneerStandard price (SP)30Input to catalogue productVeneerStandard Rate (SP)4Common to both productOverheadsStandard Rate (SP)3Common to both productStandard qunatity (SQ)500Standard labour hours (SQ)11500Standard labour hours (SQ)11500Actual price (AP)28Actual rate (AP)5Actual rate (AP)3Actual Quantity (AQ)700Actual labour hours (AQ)12000Actual labour hours (AQ)12000Vineer Price variance (AQ*(AP-SP))-1400labour rate variance (AQ*(AP-SP))12000Overhead Rate (AQ*(AP-SP))0Veneer Quantity variance (SP*(AQ-SQ))6000 labour efficiency variance (SP*(AQ-SQ))2000 Overhead efficiency variance (SP*(AQ-SQ))1500WoodStandard price (SP)5Input to deluxe productTotal14000Total1500Standard qunatity (SQ)15300Actual price (AP)6.5LabourActualFlexible BudgetVarianceOverheadActualFlexible BudgetVarianceActual Quantity (AQ)1550060000460001400036000345001500Wood Price variance (AQ*(AP-SP))23250Wood Quantity variance (SP*(AQ-SQ))1000Rack InsertStandard price (SP)5Common to both productStandard qunatity (SQ)2700Actual price (AP)3Actual Quantity (AQ)2700Rack Price variance (AQ*(AP-SP))-5400Rack Quantity variance (SP*(AQ-SQ))0PackagingStandard price (SP)7.5Common to both productStandard qunatity (SQ)2700Actual price (AP)7.6Actual Quantity (AQ)2800packaging Price variance (AQ*(AP-SP))280packaging Quantity variance (SP*(AQ-SQ))750Material Price variance16730Material qty variance7750
MaterialActualFlexible BudgetVarianceVeneer19600150004600Wood1007507650024250Rack Insert 810013500-5400Packaging21280202501030Total14973012525024480
Profit varianceActual BudgetVarianceUnits Sold27002800-100Revenues Catalogue product7000075000-5000Revenues deluxe product35700034000017000Total Revenue42700041500012000Variable ExpensesMaterials14973012525024480Labor600004600014000 Overhead36000345001500Total Variable Costs24573020575039980Contribution Margin181270209250-27980Fixed Costs40000350005000Profits141270174250-32980ObservationsIncrease in Top lineDecrease in bottom line
meeting pointsProduction ManagerQty variance is due to poor quality of veneer purchased. Poor quality of venner also resulted decrease in labour efficiency. Increased rejection and processing timesAccountant is not doing independent costing of two productsACCOUNTATDifficult to bifurcate cost of both the productsRequires additional data collectionsHence more cost and profits further reducesPurchase managerQuality is not poor. All inspection reports proves thisLocal purchase policySuppliers are importing mahagony. We can import directlySales managerUnits sales of veneer product decreased due to qualityTop Line increased due to better pricingFinal words by chairmanResolve the issues. Prepare a action planI want my bottom line to follow top line in next quarter
