Beta Pharmaceuticals Ltd.

Scenario: Budgeting and Variance Analysis

Product Details:

• Product X:
  • Standard Selling Price per Unit: $120
  • Standard Variable Cost per Unit: $80
  • Budgeted Fixed Costs: $300,000

• Product Y:
  • Standard Selling Price per Unit: $150
  • Standard Variable Cost per Unit: $100
  • Budgeted Fixed Costs: $350,000

Requirements:

1. Standard Cost Setting:
   • Establish standard costs for Product X and Product Y at Beta Pharmaceuticals Ltd. Explain the importance of setting standard costs and how they facilitate budgeting and performance evaluation.

1. Flexible Budget Preparation:
   • Prepare a flexible budget for Beta Pharmaceuticals Ltd. based on production levels ranging from 80% to 100% of capacity for both products. Analyze the budgeted revenues, costs, and profits for each production level.

1. Variance Analysis:
   • Conduct a variance analysis for Product X and Product Y by comparing actual costs and revenues against the flexible budget. Identify and explain the causes of any variances and recommend corrective actions.

1. Performance Evaluation Metrics:
   • Evaluate the performance of Beta Pharmaceuticals Ltd. using relevant metrics such as cost variance, revenue variance, and overall profit variance. Discuss how these metrics contribute to performance evaluation and decision-making.

1. Strategic Adjustments:
   • Recommend strategic adjustments to Beta Pharmaceuticals Ltd.'s budgeting and variance analysis processes to enhance accuracy, efficiency, and alignment with organizational goals.