Reference no: EM132363273
Variance analysis
You have recently started work as a financial analyst for Tasty NZ Ltd, a New Zealand - based chocolate manufacturer. You have the following information on your financial system for June 2016:
|
|
Budget
|
Actual
|
|
Sales units (bars)
|
165,000
|
196,875
|
|
Sales $
|
198,000
|
214,594
|
|
Labour cost
|
(19,800)
|
(31,500)
|
|
Raw materials cost
|
(24,750)
|
(23,625)
|
|
Packaging cost
|
(8,250)
|
(11,813)
|
|
Contribution margin
|
145,200
|
147,656
|
|
Fixed costs
|
(65,000)
|
(60,000)
|
|
Net profit
|
80,200
|
87,656
|
|
The standard cost profile for each chocolate bar is as follows
|
Budget
|
|
Sales price:
|
1.20
|
|
Labour cost:
|
(0.12)
|
|
Raw materials cost:
|
(0.15)
|
|
Packaging cost:
|
(0.05)
|
|
Contribution margin
|
0.88
|
You have received the additional information below from the factory manager, who also mentions that due to the installation of a new energy-saving and environmentally friendly packaging machine, they have had to pay some extra overtime this month, as the staff are not familiar with the new machine. Tasty have also changed the raw material suppliers.
Budget labour cost per hour: $12.50
Actual June production hours: 2,110
Budget raw materials cost per kg: S3.00
Actual raw materials used for per unit: 0.08kg
Required:
a) Prepare a flexed budget and variance analysis for the month of June.
b) Show how the profit increased from $80,200 to $87,656.
c) Break down the labour variance and material variance into rate and efficiency variance, and price and usage variance, respectively.
d) Interpret and explain your analysis of where the variances above have come from (in less than 250 words).