QUESTION THREE
Cartlidge Ltd manufactures and sells plastic kitchen containersthrough associated retail outlets throughout Australia. To competemore effectively it has recently introduced a budgetary controlsystem to assist with planning and control of operations. Detailedbelow are the budgeted and actual performance figures for theirmost popular plastic container sold for the month of December2018,
BUDGET(static) ACTUAL
Output (production and sales) 3000Units 3,300 Units
$ $
Sales $45,000 $47,850
(3,000 unit @$15) (3,300 units @ $14.50)
Raw Materials ($18,000) ($20,140)
(36,000units (38000 units @ 50 cents perunit) @ 53 cents perunit)
Labour ($6,000) ($7,040)
(300hours (320 hours
@$20 perhour) @22 per hour)
FixedOverheads ($5,000) ($4,700)
OperatingProfit $16,000 $15,970
REQUIRED:
- Based on the information above calculate a flexed budget basedon actual output / sales levels for the month of December 2018
- Describe the purpose of the flexed budget in identifyingdeviations from planned performance. (limit 60 words)
- Based on information above reconcile the operating profit undera static budget to the actual operating profit breaking down thereconciliation and identifying specific variances in as much detailaspossible.
- Assuming that the standards were all well set in terms of labortimes and rates and material usage and price, suggest one feasiblereason for each variance you have identified in (c), from what youknow about the company’s performance in December 2018. (HINT: Aspart of your answer attempt to explain why a favorable variance inone area might explain an unfavorable variance in anotherarea). (80 word limit)
