Norland-Norge AS produces corporate notebooks. Each notebook is designed for an individual customer. The companys operating budget
Question:
Norland-Norge AS produces corporate notebooks. Each notebook is designed for an individual customer. The company’s operating budget for September 2018 included these data:
Number of notebooks .......................................................................... 15,000
Selling price per book ........................................................................... NKR 20
Variable costs per book ...................................................................... NKR 8
Total fixed costs for the month .......................................................... NKR 145,000
The actual results for September 2018 were:
Number of notebooks produced and sold ...................................... 12,000
Average selling price per book .......................................................... NKR 21
Variable costs per book ...................................................................... NKR 7
Total fixed costs for the month ........................................................ NKR 150,000
The managing director of the company observed that the operating profit for September was much less than anticipated, despite a higher-than-budgeted selling price and a lower-than budgeted variable cost per unit. You have been asked to provide explanations for the disappointing September results.
Norland-Norge develops its flexible budget on the basis of budgeted revenue per output unit and variable costs per output without a detailed analysis of budgeted inputs.
Required
1. Prepare a Level 1 analysis of the September performance.
2. Prepare a Level 2 analysis of the September performance.
3. Why might Norland-Norge find the Level 2 analysis more informative than the Level 1 analysis? Explain your answer.
Step by Step Answer:
Management And Cost Accounting
ISBN: 9781292232669
7th Edition
Authors: Alnoor Bhimani, Srikant M. Datar, Charles T. Horngren, Madhav V. Rajan