FNSACC523 Assessment 2 Manage Budgets Task 3 and 4 - Final Corrected

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TASK - 3 Performance Reporting - Qwerty Ltd has provided the following information Actual Sales 8000 Cost of Sales 5200 Marketing Expense 1000 Administration Expense 600 Financial Expense 200 Prepare a Variance Analysis Report in the format supplied below based on the information supplied above. Percentage variance are to be calculated to two dec Budget Sales 8800 Cost of Sales 5280 Gross Profit 3520 Operating Expenses Marketing Expenses 1320 Administration Expenses 500 Finance Expenses 300 Total Expense 2120 Net Profit 1400

n for January: Budget 8800 60% of Budgeted sales 15% of Budgeted Sales 500 300 cimal places. Actual 8000 -800 9.09% UF 5200 -80 1.52% F 2800 -720 20.45% UF 0 NV 1000 -320 24.24% F 600 100 -20.00% UF 200 -100 33.33% F 1800 -320 15.09% F 1000 -400 28.57% UF Variance $ Variance % F Or U/F

Variance Analysis Report Dear Management, Qwerty Ltd. experienced a decrease in net profit and sales income in January as compared to the an Here's a brief rundown of how business performed this month: Sales Variance : The actual sales for January were $8,000 as opposed to the planned sales of $8,800, This drop in sales can be attributed to several factors, such as changes in consumer demand, evolvin fierce competition. The negative sales variance had an effect on the gross profit. Cost of Sales variation : The actual cost of sales was $5,200, which was less than the $5,280 forecast This resulted in a $80 (1.52%) favourable variation. Given the reduction in actual sales, we would ho variation in cost of sales similar to the sales variance, to keep achieve overall gross profit budgets, ho Gross Profit Variance : Compared to the budgeted gross profit of $3,520, the gross profit for the mon (20.45%). The reduction in sales income and the dispproportionate reduction in cost of sales means unfavourable variance. Operating Expenses Variance : The performance was inconsistent in the operating expenses area. Eff demonstrated by the $320 (24.24%) decrease in marketing expenses above the budget. Finance exp below budget, whereas administration expenses were $100 (20.00%) beyond budget. This implies th good job of controlling its non-production costs, it might have done a better job of controlling admin Total Expense Variance: The month's total operating expenses came to $1,800, $320 (15.09%) less t budget. The positive variability in marketing and finance expenses helped to reduce costs even with administration expenses. Net Profit Variance : The business declared a $1,000 net profit, which was $400 (28.57%) less than th planned. The main cause of this decline in net profit is the unfavourable variations in sales and gross operating expenses came to $1,800, $320 (15.09%) less than the $2,120 monthly budget. The positiv finance expenses helped to reduce costs even with the unfavourable variance in administration expe

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nticipated amounts. , which was $800 (9.09%) less. ng market dynamics, and t amount. ope to see a favourable owever this was not the case. nth was $2,800, a loss of $720 we have a much higher ffective cost control was penses were $100 (33.33%) hat although the business did a nistrative costs. than the $2,120 monthly the unfavourable variance in he $1,400 net profit that was s profit. The month's total ve variability in marketing and enses.

Raw Materials Cost of Production Items Raw Materials 97500 0.4907692308 Direct Labor 97500 0.2923076923 Units of Production 90000 Cost of Production Items Raw Material $ 45,000.00 $ 47,850.00 $ 48,750.00 $ 3,750.00 -$ 900.00 Direc Labour $ 54,000.00 $ 57,375.00 $ 58,500.00 $ 4,500.00 -$ 1,125.00 Variable Factory Overhead $ 27,000.00 $ 28,500.00 $ 29,250.00 $ 2,250.00 -$ 750.00 Fixed Factory Overhead $ 31,500.00 $ 31,250.00 $ 31,500.00 $ 31,500.00 $ 31,500.00 Total $ 157,500.00 $ 164,975.00 $ 168,000.00 $ 42,000.00 $ 28,725.00 Actual Units Produced Variable Cost per unit Budget $ Actual $ Flexible Budget $ Capacity Variance $ Flexible Budget Variance á the Fixed Factory Overhead should remain Task 4 – Flexible Budget Performance Reporting Cranberry Industries uses flexible budget techniques in order to effectively control costs. The data Variable cost per unit for Raw Materials = Variable Cost per unit for Overhead - Tota b) -Evaluate the production manager’s performance for the March quarter. Your evaluation an unfavourable variance between the flexible budget and the actuals of up to 2% is tolera Managers receive a bonus for favourable variances between the flexible budget and the a verall Evaluation: Policy: An unfavourable variance between the flexible budget and actuals of up to 2% is toler Results: Raw Material: -1.85% (within tolerance) Direct Labour: -1.92% (within tolerance) Variable Factory Overhead: -2.56% (within tolerance) Fixed Factory Overhead: -8.42% (exceeds tolerance) Total: -3.30% (within tolerance) Verdict: The production manager's performance aligns with the policy, as the overall varianc range. Bonus for Favourable Variances: Policy: Managers receive a bonus for favourable variances between the flexible budget and a Result: Total Variance Percentage: -3.30% Verdict: The overall variance is favourable, exceeding the threshold of 1.5%, which suggests t The production manager's performance is generally favorable since three out of the four cate within the tolerated range of -2%. The Fixed Factory Overhead variance exceeds the tolerated range, but considering the overal acceptable without further questioning. This evaluation suggests that, according to the organizational policy, the production manager variance in the Fixed Factory Overhead category. This evaluation suggests that the productio However, it's important for the organization to investigate the cause of the Fixed Factory Ove

c) What changes would you recommend be made to the budget for future quarters. Answer- To recommend changes to the budget for future quarters, we need to analyze the v budget and actuals. Based on the provided data, here are some recommendations: Investigate Fixed Factory Overhead Variances: Since the Fixed Factory Overhead variance was significantly unfavourable (-8.42%), it's crucia fixed costs, such as rent, utilities, and maintenance. Adjust the budget for future quarters ba Review Raw Material Costs: While the variance in raw material costs is within the tolerated range, it's still essential to mo negotiating with suppliers, exploring bulk purchase discounts, or implementing inventory ma Analyze Direct Labour and Variable Factory Overhead: Even though these variances are within the tolerance limit, a thorough analysis of direct labo productivity, and explore cost-saving measures. Adjust the budget accordingly to reflect a mo Consider Bonus Policy Impact: If the organization wants to incentivize managers further, it may consider revising the bonus metrics could be incorporated. Regularly Update Budget Assumptions: Review and update budget assumptions regularly to ensure they align with the current econ more accurate and realistic budget. Enhance Communication: Ensure effective communication between departments to gather accurate information for bu into their specific needs and challenges. Implement Continuous Improvement Practices: Encourage a culture of continuous improvement within the organization. This can involve reg Remember, budget adjustments should be based on a thorough analysis of the root causes o constraints. Regular monitoring and adaptability are key aspects of successful budget manag Write the above briefly ChatGPT Investigate Fixed Factory Overhead Variances: Conduct a detailed analysis to identify the causes of the significant unfavourable variance in findings. Review Raw Material Costs: Monitor and potentially adjust the budget for raw material costs. Explore opportunities for n management strategies. Analyze Direct Labour and Variable Factory Overhead: Conduct a thorough analysis of direct labor and variable factory overhead costs to identify an findings. Consider Bonus Policy Impact: Evaluate the effectiveness of the bonus policy and consider revising thresholds or incorporati Regularly Update Budget Assumptions: Ensure budget assumptions are regularly reviewed and updated to reflect changes in the eco Enhance Communication: Improve communication between departments to gather accurate information for budgeting challenges. Implement Continuous Improvement Practices:

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Implement Continuous Improvement Practices: Foster a culture of continuous improvement within the organization. Regularly assess and re Regular monitoring and adaptability are key to successful budget management. Adjustments strategic goals and financial constraints.

F/UF $ 2,850.00 -1.85% 5.96% F Within tolerated range of 2% $ 3,375.00 -1.92% 5.88% F Within tolerated range of 2% $ 1,500.00 -2.56% 5.26% F Within tolerated range of 2% -$ 250.00 -0.79% -0.80% F Within tolerated range of 2% $ 7,475.00 -1.80% Total(Static) Variance $ Flexible Budget Variance (%) Actual Budget Variance (%) the same as budgeted $31,500 in Flexible Budget produced for the March quarter before analysis indicates the following Total Actual Raw Material Cost/ Total Actual Production al Actual Variable factory Overhead cost/Total Actual Production n must refer to and comment on the following organisational policies and procedure: ated without question ctuals in total cost of production greater than 1.5%. rated without question. ce and individual variances, except for Fixed Factory Overhead, are within the tolerated actuals in total cost of production greater than 1.5%. that the production manager is eligible for a bonus based on the policy. egories (Raw Material, Direct Labour, and Variable Factory Overhead) have variances ll variance of -3.30% falls within the organization's policy, the performance is deemed r's performance for the March quarter is acceptable, even though there is an excessive on manager's performance for the March quarter aligns with the organizational policies. erhead variance that exceeded the tolerance limit.

variances and identify areas that contributed to the differences between the flexible al to investigate the causes of this variance. This could involve a detailed analysis of ased on the findings to align more closely with actual costs. onitor and potentially adjust the budget if there are consistent fluctuations. Consider anagement strategies to optimize raw material costs. or and variable factory overhead costs is advisable. Identify any inefficiencies, assess ore accurate estimate of these costs. policy. For instance, the bonus threshold could be increased or additional performance nomic environment, market conditions, and internal operations. This helps in creating a udgeting. Departments should be involved in the budgeting process to provide insights gularly assessing and refining processes to enhance efficiency and reduce costs. of variances and a consideration of the organization's strategic goals and financial gement. Fixed Factory Overhead (-8.42%). Adjust the budget for future quarters based on the negotiating with suppliers, bulk purchase discounts, and implementing inventory ny inefficiencies. Adjust the budget to reflect more accurate estimates based on the ting additional performance metrics to align with organizational goals. onomic environment, market conditions, and internal operations. g. Involve departments in the budgeting process to gain insights into specific needs and

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efine processes to enhance efficiency and reduce costs. s should be based on a thorough analysis of variances, considering the organization's

FNSACC523 Assessment 2 Manage Budgets Task 3 and 4 - Final Corrected

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