Overview

In this assignment, I will have to play the role of a senior manager.

You work for Flatland Incorporated. Your team of financial analysis has just completed two products' variances analyses for revenues, materials, and labor.

You will receive the analyses prepared by your team. Your task is to critique the analysis and develop a plan to investigate the variances.

Note: Please read all of the provided information, including the required deliverables, before beginning the assignment.

Case Information

Flatland Incorporated manufactures educational toys, primarily focusing on wooden-block products that teach children different shapes.

The following financial information is available for two of its products, for the last month.

ToddlerPreschoolBudgeted sales (units)3,200800Budgeted sales price ($ per unit)$30$85Actual sales (units)3,3001,200Actual sales price ($ per unit)$33$80 Planned production (units)3,0001,050Standard material price ($ per lft)$10 per lft$25 per lftStandard materials usage (lft per unit)1.5 lft/unit3 lft/unitStandard labor price ($ per hour)$7 per hr$9 per hrStandard labor usage (hours per unit)0.5 hrs/unit1 hr/unit Actual production (units)3,4001,100Actual materials used5,200 lft3,300 lftActual labor used1,600 hrs1,200 hrsActual materials costs$57,200$79,200Actual labor costs$10,400$10,500

Analysis

A number of different analysts computed variances and compiled the following report:

ToddlerPreschoolSales price variance9,900 U6,000 USales mix variance9,000 F25,500 FSales activity variance12,000 U8,500 F Materials spending variance5,200 U3,300 FMaterials efficiency variance10,000 F1,000 FMaterials activity variance9,000 U3,750 U Labor spending variance1,800 F300 FLabor efficiency variance1,700 F900 ULabor activity variance450 U400 U

Required

Part 1. Critique the analyses provided by the analysts. If there are errors, highlight which variances are in error, and provide the corrected analysis.

Part 2. Assume that Flatland's policy is to investigate variances that are $2,000 or 5% of the master (i.e., static) budget (whichever threshold is lower). Which variances would you investigate (using your corrected analyses)?

Part 3. Identify the two largest revenue variances and the two largest cost variances (using your corrected analyses). Identify at least two potential explanations for each of the four variances you identified.