Cost Accounting Analysis
3.0 Variance Analysis
3.1 Flexible-Budget Variance Analysis
In Barnes Scuba Diving case, the main comparison for the flexible-budget variance analysis would be between the actual results and flexible budget. Static budget would not be useful for this comparison due to the different sales unit output which may result in a misleading and inaccurate result comparison.
With reference to the Flexible Budget Section attached in Annex X, Flexible-Budget Variance for Revenues was identified to be a favourable variance of $50,400 due to the fact that there was an increase of 216 participants on top of the budgeted 1800 participants and also an additional increased in course fee of $25 on top of the budgeted $350(selling price per unit). This favourable variance was also supported with the calculation of the selling price variance.
A closer look at the variance components reveals some major deviations from plan. Contradictory to the favourable variance for Sales Revenue, the overall contribution margin (-$9057) and operating profit (-$12,057) reflected unfavourable variances instead. These unfavourable variances were caused by the more than required variable resources being consumed with Barnes bearing responsibility for all unforeseen situations that happened and absorbing the additional costs incurred. Actual variable costs increased from $218 to $247.50, causing an unfavourable flexible-budget variable cost variance of $59 457. The next section, 3.2 Variable and Fixed Variance Analysis, will look into the specific causes of this increased in cost and resources consumed. Understanding the reasons why actual results differ from budgeted amounts can help Barnes better manage its costs and pricing decisions in the future. If Barnes have not been able to pass these costs on to customers, losses would have been considerable in the future.
3.2 Variable and Fixed Variance Analysis
3.2.1 Sales Volume and Selling Price Variance Analysis
Both Sales Volume and Selling
3.1 Flexible-Budget Variance Analysis
In Barnes Scuba Diving case, the main comparison for the flexible-budget variance analysis would be between the actual results and flexible budget. Static budget would not be useful for this comparison due to the different sales unit output which may result in a misleading and inaccurate result comparison.
With reference to the Flexible Budget Section attached in Annex X, Flexible-Budget Variance for Revenues was identified to be a favourable variance of $50,400 due to the fact that there was an increase of 216 participants on top of the budgeted 1800 participants and also an additional increased in course fee of $25 on top of the budgeted $350(selling price per unit). This favourable variance was also supported with the calculation of the selling price variance.
A closer look at the variance components reveals some major deviations from plan. Contradictory to the favourable variance for Sales Revenue, the overall contribution margin (-$9057) and operating profit (-$12,057) reflected unfavourable variances instead. These unfavourable variances were caused by the more than required variable resources being consumed with Barnes bearing responsibility for all unforeseen situations that happened and absorbing the additional costs incurred. Actual variable costs increased from $218 to $247.50, causing an unfavourable flexible-budget variable cost variance of $59 457. The next section, 3.2 Variable and Fixed Variance Analysis, will look into the specific causes of this increased in cost and resources consumed. Understanding the reasons why actual results differ from budgeted amounts can help Barnes better manage its costs and pricing decisions in the future. If Barnes have not been able to pass these costs on to customers, losses would have been considerable in the future.
3.2 Variable and Fixed Variance Analysis
3.2.1 Sales Volume and Selling Price Variance Analysis
Both Sales Volume and Selling