CASE 10–39 Full Variance Analysis: Variable Costing [LO3, LO4, LO5, LO6] Anchorvale Electronics… 1 answer below »

  CASE 10–39 Full Variance Analysis: Variable Costing [LO3, LO4, LO5, LO6]

Anchorvale Electronics Limited manufactures and distributes transistors for electronics firms. In December 2014, Anchorvale required a bank loan and the bank manager insisted that Tracy Miller, Anchorvale’s president, prepare a budget for 2015. In January 2016, Anchorvale needed an additional loan and Miller asked her accountant to prepare a budget for 2016 to show the bank manager. Miller was concerned because Anchorvale’s profit for 2015 was considerably less than the 2015 budget figure given to the bank and she knew that the bank manager would

 

Depreciation . . . . . . . . . . . . . . . . . . . . . . .

$200,000

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

   100,000

 

$300,000

     

 

want to know why. As a first step in analyzing the differences, Miller copied the 2015 actual figures onto the 2015 bank budget form shown below and prepared the standard cost details shown below the budget form:

 

 

 

 

 

Static Budget

Actual

 

Variance

Sales—units. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  110,000

 105,000

 

  5,000 U

Sales—dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,750

$ 2,520

 

$  230 U

Cost of sales:

 

 

 

 

Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

440

421

 

19 F

Labour. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

880

845

 

35 F

Overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

220

205

 

15 F

Fixed factory overhead . . . . . . . . . . . . . . . . . . . . .

      300

      303

 

       3 U

 

    1,840

     1,774

 

      66 F

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

      910

      746

 

     164 U

Selling expenses:

 

 

 

 

Variable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

220

209

 

11 F

Fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .

100

102

 

2 U

Administration—fixed. . . . . . . . . . . . . . . . . . . . . . . . . .

      200

      197

 

       3 F

 

     520

      508

 

      12 F

Profit before income tax. . . . . . . . . . . . . . . . . . . . . . .

390

238

 

152 U

Income tax (40% of profit before tax). . . . . . . . . .

      156

       95

 

       61 F

Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$    234

$     143

 

$     91 U

 

 

 

 

 

 

 

 

 

 

 

 

   

Standard output 100,000 units at ½ hour = 50,000 direct labour-hours

  ($300,000 ÷ 50,000) × ½ hour . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Selling expenses:

3

Variable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

Fixed, $100,000 ÷ 100,000 units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

 

 

 

 

  Required:

1.              Redraft the budget to show the 2015 static budget, flexible budget, actual, and variances from the flexible budget, with contribution margins separately identified. Note: See the standard cost details above.

2.              Prepare a quantitative analysis to demonstrate to management the main causes for the variance from the flexible budget, as a basis both for taking corrective action and for explaining the variance from the static budget to the bank manager.

 

 

 

 

 

 

Looking for a Similar Assignment? Let us take care of your classwork while you enjoy your free time! All papers are written from scratch and are 100% Original. Try us today! Use Code FREE15