Bird Feeder Case 8
I am writing this memo to discuss the problem that there have been major budget variances for the bird feeders, and provide you with recommendations on how to improve this. I was tasked with going through the whole budgeting process and analyzing it before having to write this memo to management. The purpose of this memo is to summarize the quantitative analysis that I have been working on the past few weeks, inform you on how to improve the budgeting process, and give you my overall improvement recommendations while considering any ethical implications.
Being able to break down many different aspects of the company’s financials helped to see what the company is doing right, as well as what they need to improve on. By classifying the costs …show more content…
This includes both the flexible budget variance (-$84,476 Unfavorable) and the sales-volume variance (-$29,070 Unfavorable). The flexible budget variance is caused by the actual gross margin being less than what the flexible budget predicted it to be. The sales volume variance informs the company that there was a change in the contribution margin since they only sold 47,000 bird feeders compared to 50,000 bird feeders, which is what they budgeted. The price variance for the direct material cedar was -$22560 Unfavorable, and for direct material plastic it was $1,034 Favorable. The cedar could be unfavorable because they may not have been able to negotiate the direct material prices to be lower, or vice versa for the plastic. The price variance for the direct manufacturing labor is $5,640 Favorable. This could be from the workers working more hours than anticipated, or being paid more per hour. The efficiency variance for cedar is -$14,100 Unfavorable. For plastic, it is -$3,525 Unfavorable, and for direct labor is -$56,400 Unfavorable. For the direct materials, it could be unfavorable because more of the inputs were used than what was budgeted for, making it not efficient. The reasons for direct labor could be that the workers made the bird feeders slower than what they budgeted for. The spending variance for variable manufacturing overhead was -$235 Unfavorable, and the efficiency variance was $470 Favorable. They
Being able to break down many different aspects of the company’s financials helped to see what the company is doing right, as well as what they need to improve on. By classifying the costs …show more content…
This includes both the flexible budget variance (-$84,476 Unfavorable) and the sales-volume variance (-$29,070 Unfavorable). The flexible budget variance is caused by the actual gross margin being less than what the flexible budget predicted it to be. The sales volume variance informs the company that there was a change in the contribution margin since they only sold 47,000 bird feeders compared to 50,000 bird feeders, which is what they budgeted. The price variance for the direct material cedar was -$22560 Unfavorable, and for direct material plastic it was $1,034 Favorable. The cedar could be unfavorable because they may not have been able to negotiate the direct material prices to be lower, or vice versa for the plastic. The price variance for the direct manufacturing labor is $5,640 Favorable. This could be from the workers working more hours than anticipated, or being paid more per hour. The efficiency variance for cedar is -$14,100 Unfavorable. For plastic, it is -$3,525 Unfavorable, and for direct labor is -$56,400 Unfavorable. For the direct materials, it could be unfavorable because more of the inputs were used than what was budgeted for, making it not efficient. The reasons for direct labor could be that the workers made the bird feeders slower than what they budgeted for. The spending variance for variable manufacturing overhead was -$235 Unfavorable, and the efficiency variance was $470 Favorable. They