Variance analysis
A. Solve using a spreadsheet. See the requirements embedded in the spreadsheet. Include the IF function to determine Favourable and Unfavourable variances.
| Standard direct-labour rate |
$15.40 |
| Actual direct-labour rate |
$12.20 |
| Standard direct-labour hours |
13,000 |
| Direct-labour usage variance-unfavourable |
$9,800 |
|
|
| Standard unit price of materials |
$5.00 |
| Actual quantity purchased and used |
1,800 |
| Standard quantity allowed for actual production |
1,650 |
| Material purchase price variance-favourable |
$298 |
B. Prepare a Business Report as if for senior management:
1. Critically evaluate the purpose of variance analysis,
2. Explain why the materials price variance should be calculated on purchase,
3. Identify other areas in an organisation where variance analysis would be useful and
4. Evaluate the practical relevance of detailed overhead variance analysis.
For item 4. see the reading by Murray Wells.
Suggested word limit about 300- 400 words. Ensure that your answer is in business report format. Read the following online references regarding business report writing.
https://bit.ly/FoBAcademic-Writing-Skills
and
https://unilearning.uow.edu.au/report/4b.html