Alternative Variance Report Assignment
February 19th, 2020
the following budgeted figures have been taken from the cost records of MZ ltd:
| production units | 10 000 | 12 500 |
| capacity level | 80% | 100% |
| sales | R1 144 000 | R1 430 000 |
| direct material @R5 per KG | R200 000 | R250 000 |
| direct labour @R20 per hour | R240 000 | R300 000 |
| factory overheads | R300 000 | R330 000 |
| selling and administrative expenses | R180 000 | R190 000 |
normal capacity is equal to 12 500 units. As a result of poor economic conditions the budget for July 2019 has been set at 80%of normal capacity
the company uses the direct costing method for internal reporting purposes the following variance report for July 2019 has been presented to management
| fixed budget | actual budget | variance | |
| production units | 10 000 | 9000 | |
| material usage (kg) | 10 000 | 9000 | |
| labour hours | 12 000 | 11 500 | |
| sales | R1 144 000 | R1 003 200 | R140 800 (a) |
| material | R200 000 | R188 000 | R12 000 (f) |
| direct labour | R240 000 | R224 000 | R16 000 (f) |
| factory overhead | R300 000 | R296 000 | R4 000 (f) |
| selling and administrative expenses | R180 000 | R176 000 | R4 000 (f) |
| net profit | R224 000 | R119 000 | R104 800 (a) |
(A) prepare an alternative variance report for the department that would be more meaningful to management
(B) critically discuss the format and content of the variance report for July 2019 a represented to the department. Get Finance homework help today
