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Essay / Research Paper Abstract
This 7 page paper is based on a case study supplied by the student. Using the figures supplied the writer calculates the different variances, in terms of the entire budget for the firm as well as costs per unit and then goes on to examine how some of these variances may have occurred. The paper ends with strategic recommendations based on the variances observed. The bibliography cites 1 source.
Page Count:
7 pages (~225 words per page)
File: TS14_TEsmithton.rtf
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Unformatted sample text from the term paper:
the budgeted and actual results. The first stage of a variance analysis is to calculate the revenues and costs for the different elements so that the difference can be assessed.
The first item is the revenue. The budgeted revenue is not give, but this can be calculated, we have the revenue per unit, and the number of units sold,
from this we can calculate the budgeted revenue. Table 1 Budgeted revenue Revenue per unit (a) Units to be sold (b) Total budgeted revenue (a x b) 20 1,300
26,000 Next we need to calculate the total costs that have been budgeted. There has been a breakdown of costs per unit provides, from this we can calculate the total
budgeted costs. Table 2 Total budgeted costs Items Price per unit Units required cost per unit Total cost for 1300 units Direct materials (in kgs) 3 2 6 7,800
Direct labour (in hours) 10 0.5 5 6,500 Fixed overheads n/a n/a 2.5 3,250 Total 13.5 17,550 These figures can then be placed into the operating profit
calculation to allow for a variance to be calculated. Table 3 Variance between budgeted and actual operating profit Budgeted Actual Difference Variance Revenue 26,000 20,000 -6,000 -23.08%
Direct materials 7,800 6500 -1,300 -16.67% Direct labour 6,500 5,250 -1,250 -19.23% Fixed overheads 3,250 3,100 -150 -4.62% Operating profit 8,450 5,150 -3,300 -39.05% From this it is possible to
see that there has been a significant under performance. However the costs have also been below the amount budgeted, and as such to compare the budget with the realised cost
we need to look at the cost that were incurred per unit, comparing this to the budgeted cost per unit. The sales were under the budgeted, we will assume that
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