1. The variance analysis schedule that Frank Roberts proposed was not necessarily the best representation of the variances for Boston Creamery. Roberts’ report stated a favorable variance of $71,700 coming mainly from sales volume. He used the revised budgeted operating income and the original budgeted income to come up with the sales volume number. The budget was not detailed as to what accounted for the differences though. That would be the first change to the variance analysis report, provide a clearer depiction of the results. He should show the effect of the changes in market size. The market size variance was actually 117,642 favorable ...view middle of the document...
While it is intensive it can show more useful information and can sometimes provide information that wasn’t realized using Roberts’ schedule. There were two different approaches taken therefore providing managers with inconsistent results. The management team needs to come to together to provide the approach that will limit the fluctuations in the budget forecasts and using an approach similar to John Vance’s analysis should be enacted.
2. John Parker might schedule the variance analysis report so that it shows the $99,000U variance that is attributed to manufacturing in more detail. He obviously feels that Roberts’ is only trying to make himself look better so he would definitely change the methods used. There are many components that go into the manufacturing department and to fully understand the analysis it should be broken down further. For example, labor had increased due to a new daily truck loading system. This accounted for $34,400 of the unfavorable results. However, this increase in cost will benefit the company in the long term because it provides more customer contact and point of sale merchandising. There also should be a more in depth analysis of the variable costs (see below). You can see that the price variances for milk and sugar of $57,300 and $23,400 were the main drivers of the variable costs.
| Actual | Flexible | VARIANCE |
Dairy Ingredients | $3,679,900 | $3,648,500 | ($31,400) | U |
Milk Price Variance | 57,300 | 0 | ($57,300) | U |
Sugar | $599,900 | 596,800 | ($3,100) | U |
Sugar Price Variance $ | 23,400 | | ($23,400) | U |
Flavoring | $946,800 | 982,100 | $35,300 | F |
Cartons | $567,200 | 566,900 | ($300) | U |
Plastic Wrap | 28,700 | 29,800 | $1,100 | F |
Additives | $235,000 | 251,000 | $16,000 | F |
Supplies | 31,000 | 35,000 | $4,000 | F |
Misc. | 3,000 | 3,000 | $0 | - |
Subtotal | $6,172,200 | $6,113,100 | ($59,100) | U |
Total Fix Costs | $652,700 | 612,800 | ($39,900) | U |
Total | $6,824,900 | $6,725,900 | ($99,000) | U |
3. One of the corrective actions I would take for 1974 based on the profit variance analysis would be to emphasize the importance of forecasting an accurate budget. There seems to be conflict between the divisional managers and that should be addressed. Each person should want to provide the most useful results and not just the results that are the “least technical”. It would also be important to make sure that...