achieved as output is 200 units over budget. Despite the increased output‚ the goal of decreasing cost is failing thus far. There is an unfavorable contribution margin variance to budget of $58‚660. The components that are driving that unfavorable contribution margin variance are in the analysis below. Direct Materials The first component of the unfavorable contribution margin is direct
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corrective actions or commend things that resulted in a favorable overall variance. This year‚ the division has a favorable operating income variance of $71‚700. Highlights: · Jim Peterson‚ president of the ice cream division‚ asked Frank‚ vice-president of the Sales and Marketing of the Ice Cream Division to make a short presentation at the next management meeting commenting on the major reasons for the favorable operating income variance of $71‚700 · Using the newly installed financial planning
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from many different sources- often including people from outside of the business organization. Materials variances may be caused by the quality and price of materials purchased and by the efficiency with which these materials are used. Labor variances stem from workers’ productivity‚ pay scales of workers placed on the job‚ and the quality of the materials with which they work. Overhead variances result both from actual spending and from differences between actual and normal levels of production.
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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
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perspective‚ a variance that is due to a change in activity is very different from a variance that is due to changes in prices and changes in how effectively resources are managed. A variance of the first kind requires very different actions from a variance of the second kind. Consequently‚ these two kinds of variances should be clearly separated from each other. When the budget is directly compared to the actual results‚ these two kinds of variances are lumped together. 9-5 An activity variance is the
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Reaction to unfavorable price variance and efficiency variance for manufacturing overhead: Unfortunately the price and efficiency variance were both unfavorable for CBI. Corrective action for activity variance for manufacturing between the planning budget and the actual budget: CBI’s management needs to calculate the manufacturing overhead per bike and monitor manufacturing overhead on a monthly basis. Corrective action for manufacturing overhead in the revenue and spending variance: CBI’s management
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Labor rate variance is the difference between the actual labor rate and the applied overhead rate (standard rate multiplied by the number of actual hours worked). Consider this and respond to the following: • "Our workers are all under labor contracts. Therefore‚ our labor rate variance is bound to be zero." Do you agree or disagree that the labor rate variance will be zero if all workers are under labor contracts? Explain giving reasons. The concept of labor rate variance and its application
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| Standard | Actual | Type of Variance | Labor cost | $10.00 per hr | $9.60 per hour | favorable | Labor usage | 61‚000 hrs | 61‚800 hrs | unfavorable | Fixed cost spending | $400‚000 | $390‚000 | favorable | Fixed cost per unit | $3.20 per unit | $3.16 per unit | favorable | Sales volume | 40‚000 units | 42‚000 | unfavorable | Sales price | $3.60 per unit | $3.63 per unit | unfavorable | Materials cost | $2.90 per pound | $3.00 per pound | unfavorable | Materials usage | 91‚000
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earnings pattern every year. According to company policy‚ variances are taken directly to the income statement as an adjustment to cost of goods sold. Favorable variances have the effect of increasing net operating income‚ and unfavorable variances have the effect of decreasing net operating income. Lansing had rigged the standards so that there were always large favorable variances. Company policy was a little vague about when these variances have to be reported on the divisional income statements
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products. Managers in Peyton Approved need to analysis what is causing this unfavorable factors in order to fix what is going wrong. For example‚ if the supplier is sending defected parts for the products this will increase the material costs. If this is happening the business would need to consider changing suppliers‚ so that they are not falling behind on orders or loosing materials. An example for labor costs being unfavorable would be that the business has not fully trained some employees as to how
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