At Thirsty Zaps Pty Ltd$,$ the manager, Magnolia oversees the production of their flagship product: luxury glass bottles with an elegant gold coating. The company has recently faced challenges due to market price volatility and supplier price increases, particularly concerning the gold coating material. Amidst these external pressures, Magnolia notes that internal operations have also evolved, with improvements in production techniques and occasional variations in product specifications. The marketplace for luxury goods such as Thirsty Zaps' bottles is highly sensitive to competitive pressures and shifts in consumer valuation, prompting Magnolia to analyze the effectiveness of the company's sales strategies in response to changes in market demand. As the fiscal year$-$end of February $2024$ arrives, with a policy of maintaining low inventories, Magnolia seeks a focused analysis on gold coating material costs and bottle sales to identify opportunities for cost optimization and strategic adjustments.

Financial Data

Description

Budget

Actual

Quantity of bottles sold

$1000$ units

$900$ units Gold coating material cost $($total$)$

R$50,000$

R$58,500$

Quantity of gold coating material $($purchased and issued$/$used$)$

$10$kgs

$9,8$kgs

Sales $($total revenue$)$

R$200,000$

R$207,000$

The standard cost for the gold coating material is R$5$ per gram, and the standard selling price for each bottle has been set at R$200.$

Required:

Magnolia has requested an analysis of the variances for gold coating material and bottle sales. Indicate whether the variance is adverse or favorable, give possible reasons for the variance:

a$)$

Material price variance. $($Calculation $(3)$; Reason $(2))$

b$)$

Sales price variance. $($Calculation $(3)$; Reason $(2))$

c$)$

Sales volume variance. $($Calculation $(3)$; Reason $(2))$