Part 2: Variance Analysis As part of the standard costing review process, Ms Frost asked Mr Winters provide the latest monthly performance report which compares actual against budgeted figures. The following performance report for the month of February was provided: Difference No. of tubs of Tropical Mango sherbet Budget 2,500 Actual 2,300 $ $ s Direct materials costs: Frozen mango pieces Raw sugar Coconut water Cardboard tubs Total direct material costs Direct labour costs Total direct costs 84,375.00 525.00 15,000.00 375.00 100,275.00 80,730.00 483.00 14,973.00 345.00 96,531.00 (3,645.00) (42.00) (27.00) (30.00) (3,744.00) 80.730.00 4,230.00 76,500.00 176,775.00 177,261.00 486.00 Additional information: 2,990 direct labour hours were used to produce the 2,300 tubs of sherbets. To manage inventory storage costs, the purchasing department generally places monthly purchasing orders based approximately on next month's budgeted production volume. The purchasing department paid $600.00 for 8.000 kilograms of raw sugar, $16,800 for 8,000 litres of coconut water, and $450.00 for 3,000 cardboard tubs. Four months ago, the purchasing manager took advantage of an opportunity to purchase 150,000 kilograms of frozen mangoes at discounted price of $405,000 from a frozen fruit manufacturer that went into receivership Required: a) Ms Frost did not find the performance report very helpful, and asked Mr Winters to further i) Calculate the direct materials variances for frozen mangoes, raw sugar, coconut water and cardboard tubs ii) Calculate the direct labour variances. (Hint: All relevant standards required for calculating variances are developed in Part 1 of the question.) b) Briefly explain the main reason why Ms Frost did not find the performance report very helpful (Hint: Think about why the differences between budget and actual figures in the performance report arose.) Part 2: Variance Analysis As part of the standard costing review process, Ms Frost asked Mr Winters provide the latest monthly performance report which compares actual against budgeted figures. The following performance report for the month of February was provided: Difference No. of tubs of Tropical Mango sherbet Budget 2,500 Actual 2,300 $ $ s Direct materials costs: Frozen mango pieces Raw sugar Coconut water Cardboard tubs Total direct material costs Direct labour costs Total direct costs 84,375.00 525.00 15,000.00 375.00 100,275.00 80,730.00 483.00 14,973.00 345.00 96,531.00 (3,645.00) (42.00) (27.00) (30.00) (3,744.00) 80.730.00 4,230.00 76,500.00 176,775.00 177,261.00 486.00 Additional information: 2,990 direct labour hours were used to produce the 2,300 tubs of sherbets. To manage inventory storage costs, the purchasing department generally places monthly purchasing orders based approximately on next month's budgeted production volume. The purchasing department paid $600.00 for 8.000 kilograms of raw sugar, $16,800 for 8,000 litres of coconut water, and $450.00 for 3,000 cardboard tubs. Four months ago, the purchasing manager took advantage of an opportunity to purchase 150,000 kilograms of frozen mangoes at discounted price of $405,000 from a frozen fruit manufacturer that went into receivership Required: a) Ms Frost did not find the performance report very helpful, and asked Mr Winters to further i) Calculate the direct materials variances for frozen mangoes, raw sugar, coconut water and cardboard tubs ii) Calculate the direct labour variances. (Hint: All relevant standards required for calculating variances are developed in Part 1 of the question.) b) Briefly explain the main reason why Ms Frost did not find the performance report very helpful (Hint: Think about why the differences between budget and actual figures in the performance report arose.)
