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For this assignment, you will provide possible explanations for-(Answered)

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Question

For this assignment, you will provide possible explanations for the variances that you have calculated and suggestions as to how the company might try to improve its cost control.

Orchid Ltd. is a small furniture manufacturer. It was established as a family-owned business 30 years ago and prides itself on high-quality products. Most of its products are made to order as a result of direct orders from Internet-based sales. Typically the company has been profitable, operating at the top end of the market; recently, however, costs appear to have been increasing and the company has also seen a decline in its sales. The workforce is highly skilled and recently several of the experienced craftspeople who make the products have retired, and the company has had problems recruiting, training and retaining suitably skilled employees. One of its products, a table, has the following standard costs:

?

Direct materials (8m @ ?30/m)

240.00

Direct labour (10 hours @ ?25/hr)

250.00

Fixed overheads

160.00

650.00

Selling price

950.00

Standard profit margin

300.00

The table is made from solid oak and the above materials reflect the size of the table in square metres. The labour required to make the table is highly skilled.

The monthly production and sales are planned to be 800 units. The actual results for March were as follows:

?

Sales revenue

753,300

Less

Direct materials

(192,500)

(7,000m)

Direct labour

(221,000)

(8500 hours)

Fixed overheads

(130,000)

Operating profit

209,800

There were no opening or closing stocks. The company manufactured and sold 810 tables; this is more than budgeted due to a successful marketing campaign.

Required

Question 1 and 2 should be submitted as an operating statement,

Calculate the flexed and actual budget.

Calculate the following variances:

  • Sales variances; volume and price
  • Direct material variances; usage and price
  • Direct labour variances; efficiency and rate
  • Fixed overhead variance; spending

What are possible reasons for the variances? How might the company improve its cost control?


For this assignment, you will provide possible explanations for the variances that

 

you have calculated and suggestions as to how the company might try to

 

improve its cost control.

 

Orchid Ltd. is a small furniture manufacturer. It was established as a familyowned business 30 years ago and prides itself on high-quality products. Most of

 

its products are made to order as a result of direct orders from Internet-based

 

sales. Typically the company has been profitable, operating at the top end of the

 

market; recently, however, costs appear to have been increasing and the

 

company has also seen a decline in its sales. The workforce is highly skilled and

 

recently several of the experienced craftspeople who make the products have

 

retired, and the company has had problems recruiting, training and retaining

 

suitably skilled employees. One of its products, a table, has the following

 

standard costs:

 


 

?

 

Direct materials (8m @ ?30/m)

 


 

240.00

 


 

Direct labour (10 hours @ ?25/hr)

 


 

250.00

 


 

Fixed overheads

 


 

160.00

 

650.00

 


 

Selling price

 


 

950.00

 


 

Standard profit margin

 


 

300.00

 


 

The table is made from solid oak and the above materials reflect the size of the

 

table in square metres. The labour required to make the table is highly skilled.

 

The monthly production and sales are planned to be 800 units. The actual results

 

for March were as follows:

 


 

?

 

Sales revenue

 

Less

 


 

753,300

 


 

Direct

 

materials

 


 

(192,500)

 


 

(7,000m)

 


 

Direct labour

 


 

(221,000)

 


 

(8500

 

hours)

 


 

Fixed

 

overheads

 


 

(130,000)

 


 

Operating profit

 


 

209,800

 


 

There were no opening or closing stocks. The company manufactured and sold

 

810 tables; this is more than budgeted due to a successful marketing campaign.

 


 

Required

 

Question 1 and 2 should be submitted as an operating statement,

 

1

 


 

Calculate the flexed and actual budget.

 


 

2

 


 

Calculate the following variances:

 


 


 


 


 


 

Sales variances; volume and price

 

Direct material variances; usage and price

 

Direct labour variances; efficiency and rate

 

Fixed overhead variance; spending

 


 

1

 

3 What are possible reasons for the variances?

 

4 How might the company improve its cost control?

 


 

 

Paper#9209855 | Written in 27-Jul-2016

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