22.7 Robert Jordan recently joined Larkhill Products Limited as a product manager. The company manufactures, distributes, and sells a range of popular card games. At the end of his first month in post, Robert received the following statement from the management accountant (Dave Ellis).

Robert left school at the age of 18 with a couple of GCE advanced level passes. He had started his career promoting double glazing for a local company before moving into selling central heating systems. He was good at persuading people to buy what he was selling and for the first ten years of his career he rarely stayed in one job for longer than two years. His ability and experience enabled him to gain promotion to more senior positions in sales and marketing.
Robert was never interested in going to college or university and he was far too busy to think of studying part time for a professional qualification. So when he joined Larkhill he knew a great deal about selling, but little about the other functional activities of the company, e.g. accounting, distribution, human relations and production. His interview had not been handled particularly well but Robert was good at dealing with people so he had been able to give the impression that he had a wide knowledge of business.
Robert panicked when he received the management accountant’s statement.What was it?
What did it mean? What was he supposed to do with it? Dare he ask anybody to help him?
After thinking about the problem overnight he decided to tackle it head on. The next morning he telephoned David Ellis, the management accountant. He was very authoritative and at the same time apologetic. ‘Sorry about this, Dave,’ he wheedled, ‘As you know, I’m new here and my other companies had different ways of doing things. I’d appreciate it if you would do me a position paper about the monthly variance report.’He then indicated in more detail what he wanted. Dave agreed to supply him with some more information.
Robert was pretty sure that he had not convinced Dave about the reason why he wanted a ‘position paper’. Nevertheless, he was confident that charm and warm words would see him through an embarrassing problem – as it always had.
Required:
Prepare an explanation for Robert Jordan explaining what the monthly variance report means and what action he should take over it.

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Larkhill Products Limited Monthly variance report: January 2004 Original budget Flexed Actual Quantity Price budget Total variance variance variance per unit Units Units Units Sales volume 20000 18000 18000 2000(A) Production volume 20000 18000 18500 1500(A) 000 000 000 000 000 000 Sales 40 800 720 648 72(A) 72(A) Direct material 18* 360 324 360 45(F) 81(A) 36 (A) Direct labour 12 240 216 270 90(F) 44 (A) 54(A) 600 540 630 135(F) 225(A) 90 (A) Contribution 200 180 18 162 (A) Fixed costs 150 150 140 10 (F) (10)(F) Profit/(loss) 50 30 (122) 135(F) 287(A) 152 (A) *= 2m x 9. 3 DLH 4.