Question 3

GardenKare Company manufactures several popular brands of herbicides, pesticides, fertilizers, and other garden care products. The company is highly decentralized, and each product line is independently evaluated every month using predetermined standards. The companys leading product, Dedbug is marketed in two different level of potency Zap being the most potent followed by Strike. The corporate controller, Morton provides you with the following data pertaining to November 2021:

Budget
Product	Variable production cost per ton	Variable marketing cost per ton	Selling price per ton	Sales quantity in tons
Zap	$2,500	$500	$4,500	54
Strike	2,000	300	3,000	270

Actual
Product	Variable production cost per ton	Variable marketing cost per ton	Selling price per ton	Sales quantity in tons
Zap	$2,600	$550	$3,500	40
Strike	2,100	270	3,200	160

Management is concerned about the shortfall in profit compared to the budget and would like to know why, in order to take corrective action, if needed. Management would also like to know its impact on profit with a view to apportion responsibility to the department heads concerned.

The company based its sales estimates on a predicted monthly industry volume of 6,480 tons. In November, the sales of garden products were low and the actual industry sales were only 5,900 tons, For November, the company did not budget any fix costs. However, actual fixed manufacturing costs incurred were $1,800.

Required:

1. Compute all meaningful variance by product, wherever feasible, and reconcile budgeted income to actual income.
2. Comment on what mainly caused the shortfall in actual income.