Question

In: Finance

the following budgeted figures have been taken from the cost records of MZ ltd: production units...

the following budgeted figures have been taken from the cost records of MZ ltd:

production units 10 000 12 500
capacity level 80% 100%
sales R1 144 000 R1 430 000
direct material @R5 per KG R200 000 R250 000
direct labour @R20 per hour R240 000 R300 000
factory overheads R300 000 R330 000
selling and administrative expenses R180 000 R190 000

normal capacity is equal to 12 500 units. As a result of poor economic conditions the budget for July 2019 has been set at 80%of normal capacity

the company uses the direct costing method for internal reporting purposes the following variance report for July 2019 has been presented to management

fixed budget actual budget variance
production units 10 000 9000
material usage (kg) 10 000 9000
labour hours 12 000 11 500
sales R1 144 000 R1 003 200 R140 800 (a)
material R200 000 R188 000 R12 000 (f)
direct labour R240 000 R224 000 R16 000 (f)
factory overhead R300 000 R296 000 R4 000 (f)
selling and administrative expenses R180 000 R176 000 R4 000 (f)
net profit R224 000 R119 000 R104 800 (a)

(A) prepare an alternative variance report for the department that would be more meaningful to management

(B) critically discuss the format and content of the variance report for July 2019 a represented to the department

Solutions

Expert Solution

a] A more meaningful report would be a comparison for fixed budget with flexible budget to find the activity variances
and a comparison of the flexible budget with the actuals to give the revenue and spending variances.
Fixed Budget Activity Variance Flexible Budget Revenue/Spending Variance Actuals
Production in units 10000 9000 9000
Material usage [kg] 10000 9000 9000
Labor hours 12000 10800 11500
Sales $    11,44,000 $       1,14,400 U 1029600 26400 U 1003200
Variable expenses: `
Material $       2,00,000 $           20,000 F 180000 8000 U 188000
Direct labor $       2,40,000 $           24,000 F 216000 8000 U 224000
Total variable expenses $       4,40,000 $           44,000 F 396000 16000 U 412000
Contribution margin $       7,04,000 $           70,400 U 633600 42400 U 591200
Fixed expenses:
Factory overhead $       3,00,000 $                    -   N 300000 4000 F 296000
Selling and administrative expenses $       1,80,000 $                    -   N 180000 4000 F 176000
Total fixed expenses $       4,80,000 $                    -   N 480000 8000 F 472000
Net profit $       2,24,000 $           70,400 U 153600 34400 U 119200
b] The performance has been unsatisfactory as the revenue/spending variances are all unfavorable, except for the fixed
expenses variances which are favorable.

Related Solutions

The following data (in thousands of dollars) have been taken from the accounting records of the...
The following data (in thousands of dollars) have been taken from the accounting records of the Maroon Corporation for the just-completed year. Sales $1,700 Raw materials inventory, beginning $50 Raw materials inventory, ending $25 Purchases of raw materials $210 Direct labor $360 Manufacturing overhead $330 Administrative expenses $400 Selling expenses $200 Work-in-process inventory, beginning $120 Work-in-process inventory, ending $150 Finished goods inventory, beginning $80 Finished goods inventory, ending $120 Use the above data to prepare (in thousands of dollars) a...
The following inventory information was taken from the records of GlobeKom Ltd: Historical cost   $12,000 Replacement...
The following inventory information was taken from the records of GlobeKom Ltd: Historical cost   $12,000 Replacement cost   $9,000 Expected selling price   $10,000 Expected selling cost   $1,500 Normal profit margin   10% of selling price Under IAS 2, what is the net realizable value for inventory? A. 10,000 B. 9,500 C.9,000 D. 8,500 Under IAS 2, what should be the impairment loss for Inventory A.0 B.2,000 c.3,500 D.1,500 Under U.S. GAAP, what should be the market value for Inventory (assuming LCM method...
1. The following inventory information was taken from the records of GlobeKom Ltd: Historical cost $12,000...
1. The following inventory information was taken from the records of GlobeKom Ltd: Historical cost $12,000 Replacement cost $9,000 Expected selling price $10,000 Expected selling cost $1,500 Normal profit margin 10% of selling price Under U.S. GAAP, what should be the impairment loss for inventory (assuming LCM method is used)? A. $0 B. $3,500 C. $2,000 D. $1,500 2. The following inventory information was taken from the records of GlobeKom Ltd: Historical cost $12,000 Replacement cost $9,000 Expected selling price...
The following data (in thousands of dollars) have been taken from the accounting records of Larner...
The following data (in thousands of dollars) have been taken from the accounting records of Larner Corporation for the year just completed: Sales $870 Purchase of raw materials 100 Direct labour 140 Manufacturing overhead 220 Administrative expenses 150 Selling expenses 150 Raw materials inventory, beginning 50 Raw materials inventory, ending 75 Work-in-process inventory, beginning 60 Work-in-process inventory, ending 5 Finished goods inventory, beginning 120 Finished goods inventory, ending 180 Required: (a)  Prepare a schedule of cost of goods manufactured in good...
The following data (in thousands of dollars) have been taken from the accounting records of Larop...
The following data (in thousands of dollars) have been taken from the accounting records of Larop Corporation for the just completed at the year Sales ................................................................................ Purchases of raw materials ............................................. Direct labor ..................................................................... Manufacturing overhead ................................................. Administrative expenses ................................................. Selling expenses.............................................................. ended of 31 March 2018 $870 $190 $200 $230 $150 $140 Raw material Work in process Finished goods Required: Inventory at Inventory at 31.3.2017 31.3.2018 $$ 10 40 20 50 90 130 a. Prepare a Schedule of Cost...
(TCO A) The following data (in thousands of dollars) have been taken from the accounting records...
(TCO A) The following data (in thousands of dollars) have been taken from the accounting records of the Maroon Corporation for the just-completed year. Sales 1,300 Raw materials inventory, beginning 25 Raw materials inventory, ending 30 Purchases of raw materials 250 Direct labor 350 Manufacturing overhead 500 Administrative expenses 300 Selling expenses 250 Work in process inventory, beginning 150 Work in process inventory, ending 100 Finished goods inventory, beginning 80 Finished goods inventory, ending 110 Use the above data to...
The following data (in thousands of dollars) have been taken from the accounting records of Larmont...
The following data (in thousands of dollars) have been taken from the accounting records of Larmont Corporation for the year just completed: Sales $990 Purchases of raw materials* $100 Direct labour $240 Indirect labour $100 Indirect material $10 Other Factory Overhead $100 Administrative expenses $100 Selling expenses $140 Raw materials inventory, beginning* $20 Raw materials inventory, ending* $80 Work in process inventory, beginning $50 Work in process inventory, ending $30 Finished goods inventory, beginning $160 Finished goods inventory, ending $150...
The following data (in thousands of dollars) have been taken from the accounting records of Larmont...
The following data (in thousands of dollars) have been taken from the accounting records of Larmont Corporation for the year just completed: Sales $990 Purchases of raw materials* $100 Direct labour $240 Indirect labour $100 Indirect material $10 Other Factory Overhead $100 Administrative expenses $100 Selling expenses $140 Raw materials inventory, beginning* $20 Raw materials inventory, ending* $80 Work in process inventory, beginning $50 Work in process inventory, ending $30 Finished goods inventory, beginning $160 Finished goods inventory, ending $150...
The following data (in thousands of dollars) have been taken from the accounting records of Adi’s...
The following data (in thousands of dollars) have been taken from the accounting records of Adi’s Custom Shoe Company as at September 30th Sales $ 450 Purchases of raw materials $ 50 Direct Labour $ 70 Manufacturing overhead $ 60 Administrative expenses $ 80 Selling expenses $ 65 Ram materials inventory, beginning $ 20 Ram materials inventory, ending $ 20 Work in process inventory, beginning $ 30 Work in process inventory, ending $ 20 Finished goods inventory, beginning $ 45...
The following data (in thousands of dollars) have been taken from the accounting records of Karling...
The following data (in thousands of dollars) have been taken from the accounting records of Karling Corporation for the year just ended. Sales $990 Raw materials inventory, beginning $40 Raw materials inventory, ending $70 Purchases of raw materials $120 Direct labour $200 Manufacturing overhead $230 Administrative expenses $150 Selling expenses $140 Work-in-process inventory, beginning $70 Work-in-process inventory, ending $50 Finished goods inventory, beginning $120 Finished goods inventory, ending $160 1.) What was the cost of goods manufactured (finished) for the...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT