Frogs #6 Performing Variance Analysis Goal: To perform basic variance analysis t
ID: 2554519 • Letter: F
Question
Frogs #6
Performing Variance Analysis
Goal:
To perform basic variance analysis to help determine the cause(s) for missing budget targets.
Information:
Frogs, Inc. decided to add the new commercial projects this year. You have prepared a CM Income Statement at the end of the first year of providing the service. After showing your results to the Owners, they are concerned that Frogs, Inc. decision to provide the commercial projects was the wrong decision. They have asked you to perform a basic variance analysis to give them more information.
Here is the information you have gathered:
Budgeted
Actual
Sales Information
# of projects sold
100
85
Sales Price/Project (average)
$36,750
$39,500
DL Information
Hours per project
Owners
40
45
Designers
120
130
Sr. Engineers
80
75
Jr. Engineers
240
260
Concrete Casters
40
30
Wages/hour
Owners
$50
$55
Designers
$40
$40
Sr. Engineers
$30
$35
Jr, Engineers
$25
$23
Concrete Casters
$20
$20
Variable MOH Information
Driver Usage per Project
Owners
1
1
Designers
1
1
Engineering
320
335
Concrete Casting
20
20
POHR for each department
Owners
$35
$50*
Designers
$120
$120
Engineering
$6.71
$6.25
Concrete Casters
$9.30
$15.00
*Actual Variable OH rates have been included in the chart for ease of computations.
Fixed costs actual expenditures were as follows: warehouse rent $125,000, Insurance $45,000, Equipment depreciation $250,000, department supervisor $60,000, and direct advertising $20,000.
One last note: The economy has remained steady and growth is actually increasing in the area as many new businesses are expanding.
Assignment:
1 – What is the fundamental underlying issue (or issues) for this problem? Explain.
2 - What are the Labor Rate and Efficiency variances for the commercial projects? You will need to compute the variance for each level of employee independently and report the total variances for all employees. The more information here, the better analysis you will have.
3 – What are the Variable Manufacturing Overhead Spending and Efficiency variances for the commercial projects? You will need to examine each department separately and report the total variance for each department.
4 – What are the Sales Price and Sales Volume Variances for the commercial projects?
6 – What is the DM price variance and quantity variance? There is not enough information to break this down into each material so just provide the total variance.
5 – Based on your answers to the previous questions, how could Frogs, Inc. improve the production process of the commercial projects? Explain.
Budgeted
Actual
Sales Information
# of projects sold
100
85
Sales Price/Project (average)
$36,750
$39,500
DL Information
Hours per project
Owners
40
45
Designers
120
130
Sr. Engineers
80
75
Jr. Engineers
240
260
Concrete Casters
40
30
Wages/hour
Owners
$50
$55
Designers
$40
$40
Sr. Engineers
$30
$35
Jr, Engineers
$25
$23
Concrete Casters
$20
$20
Variable MOH Information
Driver Usage per Project
Owners
1
1
Designers
1
1
Engineering
320
335
Concrete Casting
20
20
POHR for each department
Owners
$35
$50*
Designers
$120
$120
Engineering
$6.71
$6.25
Concrete Casters
$9.30
$15.00
Frons, In Static Budget Flexible Budçet For Year Ending 2013 Contribution Margin Income Statement Total units to be sold: Total Urits to be scld: Total Units to be sod: ,123,750 Dadgn Cepartment Design Dapartmant 1Enginsaring 16 ocrete Casters Concrete Casters Deslan Dapartmant Dergn Department Concrete Casters 28 Contrution Marci Contrution Margin Equipment Deprecistion Cirect AdvertisingExplanation / Answer
Actual Hours x Standard Rate ? - ? Standard Hours x Standard Rate
1 Fundamental issues are as follows: Increase the sales price which results decrease in Qunatity of goods sold resulting in decrease of sales revenue. Owners & Designer labours are not worked effectively. Variable overhead in case of engineering is unfavourable. 2 Labour rate efficiency Actual labour hour*(Actual rate-Standard rate) Remarks Owners -225 Favourable Designer 0 Sr.Engineer 375 Unfavourable Jr.Engineer -520 Favourable Concrete Casters 0 2 Labour efficiency varianceActual Hours x Standard Rate ? - ? Standard Hours x Standard Rate
Remarks Owners 250 Unfavourable Designer 400 Unfavourable Sr.Engineer -150 Favourable Jr.Engineer 500 Unfavourable Concrete Casters -200 Favourable 4 Sales price variance Actual Qty*(Actual rate-Standard rate) 233750 Favourable 4 Sales Volumn variance (Actual Qty-Budget Qty)*Standard contribution per unit 273927 3 Variable Overhead Spending Variance (Actual Manfacturing variable overhead-Actual hours)*standard variable overhead per hour Owners 15 Unfavourable Designer 0 Engineer -154.1 Favourable Concrete Casters 114 Unfavourable 3 Variable Overhead Efficiency Variance Standard hour*Standard rate-Actual Hours*Standard rate Owners 0 Designer 0 Engineer -100.65 Unfavourable Concrete Casters 0Related Questions
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