Preparing Financial Forecasts. This report is for management of Tricol plc, and the report should take consideration of discuss the possible reasons for variances, which should include recommendations and flex the budget figures, as well as calculate the

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Introduction

This report is for management of Tricol plc, and the report should take consideration of discuss the possible reasons for variances, which should include recommendations and flex the budget figures, as well as calculate the material, labour and overhead variances.

In addition, as the firm now considering the development of its own distribution arm. It should include assumptions, application of payback period and NPV, as well as evaluation and recommendation.

Part A

1.0 Flex the budget for Tricol of June

2.0 Calculate the Variances

2.1 Direct Material Total Variance

= (stanard units of actual production * standard price)-(actual quantity * actual price)

= 4kg/unit*£10/kg*1,600units-£61,600

= £2,400 F

The rate for direct material total variances is £2,400/ £64,000 * 100%= 3.75%

2.2 Direct Material Usage Variance

= standard price*(standard units of actual production-actual units)

= £10/kg*(4kg/unit*1,600units-5,600kg)

= £10*(6,400kg-5,600kg)

= £8,000 F

The rate for direct material usage variances is 12.5%

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2.3 Direct Material Price Variance

= actual quantity*(standard price-actual price

= 5,600kg*[£10/kg-(£61,600kg/5,600kg)]

= 5,600kg*(£10/kg-£11/kg)

=£5,600 A(3.75%)

The rate for direct material price variances is 3.75%

2.4 Direct Labour Total Variance

= (standard hours of actual production*standard rate ph)-(actual hours*actual rate ph)

= 3,200hrs*£9-3,520hrs*£10

= £6,400 A

The rate for direct labour total variances is22.22%

2.5 Direct Labor Efficiency Variance

= standard rate ph * (standard hours of actual production – actual hours)

= £9*(3,200hrs-3,520hrs)

= £2,880A

The rate for direct labour efficiency variances is 10%

2.6 Direct Labor Rate Variance

= actual hours*(standard rate ...

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