In this assignment, you will play the role of a senior manager.
You work for Flatland Incorporated. Your team of financial analysis has just completed two products' variances analyses for revenues, materials, and labor.
You will receive the analyses prepared by your team. Your task is to critique the analysis and develop a plan to investigate the variances.
Note: Please read all of the provided information, including the required deliverables, before beginning the assignment.
Case Information
Flatland Incorporated manufactures educational toys, primarily focusing on wooden-block products that teach children different shapes.
The following financial information is available for two of its products, for the last month.
|
Toddler
|
Preschool
|
|
Budgeted sales (units)
|
3,200
|
800
|
|
Budgeted sales price ($ per unit)
|
$30
|
$85
|
|
Actual sales (units)
|
3,300
|
1,200
|
|
Actual sales price ($ per unit)
|
$33
|
$80
|
|
Planned production (units)
|
3,000
|
1,050
|
|
Standard material price ($ per lft)
|
$10 per lft
|
$25 per lft
|
|
Standard materials usage (lft per unit)
|
1.5 lft/unit
|
3 lft/unit
|
|
Standard labor price ($ per hour)
|
$7 per hr
|
$9 per hr
|
|
Standard labor usage (hours per unit)
|
0.5 hrs/unit
|
1 hr/unit
|
|
Actual production (units)
|
3,400
|
1,100
|
|
Actual materials used
|
5,200 lft
|
3,300 lft
|
|
Actual labor used
|
1,600 hrs
|
1,200 hrs
|
|
Actual materials costs
|
$57,200
|
$79,200
|
|
Actual labor costs
|
$10,400
|
$10,500
|
Analysis
A number of different analysts computed variances and compiled the following report:
|
Toddler
|
Preschool
|
|
Sales price variance
|
9,900 U
|
6,000 U
|
|
Sales mix variance
|
9,000 F
|
25,500 F
|
|
Sales activity variance
|
12,000 U
|
8,500 F
|
|
Materials spending variance
|
5,200 U
|
3,300 F
|
|
Materials efficiency variance
|
10,000 F
|
1,000 F
|
|
Materials activity variance
|
9,000 U
|
3,750 U
|
|
Labor spending variance
|
1,800 F
|
300 F
|
|
Labor efficiency variance
|
1,700 F
|
900 U
|
|
Labor activity variance
|
450 U
|
400 U
|
Required
Part 1. Critique the analyses provided by the analysts. If there are errors, highlight which variances are in error, and provide the corrected analysis.
Part 2. Assume that Flatland's policy is to investigate variances that are $2,000 or 5% of the master (i.e., static) budget (whichever threshold is lower). Which variances would you investigate (using your corrected analyses)?
Part 3. Identify the two largest revenue variances and the two largest cost variances (using your corrected analyses). Identify at least two potential explanations for each of the four variances you identified.