Briefly explain the main reason why Ms Frost did not find the performance report very helpful by the variance in the photo. (Hint: Think about why the differences between budget and actual figures in the performance report arose.)

You may start by: comparing actual and budgeted output. What do you think the difference between actual and budgeted output suggests about the level of actual and budgeted costs? Would you expect either actual or budgeted costs to be higher? If so, which one and why? Why variances (which are calculated to identify gaps between actual and budgeted/standard performance) differ from the difference between actual and standard costs in the table.

Direct materials variances: Frozen mangoes Variance Calculation Notes DMPV = PQ * (AP - SP) 150,000kg * ($2.70 -$3.00) AP = $405,000/150,000kg =$2.70 $45,000 Fav DMQV = SP * (AQ-SQ) $3.00 * (29,900kg - 25,875kg) AQ = $80,730/$2.70 = 29,900kg $12,075 Unfav SQ = 2,300*11.25kg = 25,875kg Raw sugar Variance Calculation Notes DMPV = PQ * (AP - SP) 8,000kg * ($0.075 -$0.07) AP = $600/8,000kg $40 Unfav Raw sugar DMQV = SP * (AQ-SQ) $0.07 * (6,440kg - 6,900kg) AQ = 483/0.075 = 6,440kg -$ 32.20 Fav SQ = 2,300*3kg = 6,900kg Coconut Water Variance Calculation Notes DMPV = PQ * (AP - SP) 8,000 Itr * ($2.1 -$2) AP = $16,800/8,000 Itr $800 Unfav DMQV = SP * (AQ-SQ) $2 * (7,130 - 6,900) AQ = $14,973/$2.1 = 7, 130kg $ 460 Unfav SQ = 2,300 * 3 = 6,900kg Cardboard Tubs Variance Calculation Notes DMPV = PQ * (AP - SP) 3,000* ($0.15-$0.15) AP = $450/3,000 0 (No variance DMQV = SP * (AQ-SQ) $0.15 * (2,300 - 2,300) AQ = $345/$0.15 = 2,300 0 (No variance) SQ = 2,300 * 1 = 2,300 ) Direct Labour variances: Variance Calculation Notes DLRV = AH * (AR - SR) 2,990* ($27 -$27) AR = $80,730/2,990 = 27 0 (No variance DLEV = SR * (AH-SH) $27 * (2,990 - 2,606.67) SH = 2,300 * (50+15+3)/60 = 2606.67 $10,350 Unfav