1. Sally is reviewing last months performance of Leeds division due to large variances flagged up in the system. Sally has asked you to analyse the variances and identify possible causes. You should make reasonable assumptions to apply appropriate management accounting tools or techniques to investigate the issues and identify responsible individuals/ departments who should be held responsible. In addition, you should suggest different ways managers could improve the divisions performance by providing evidence from existing research.

The division produces premium day cream and the standard cost of 100 ml cream in cosmetic tubes is provided below:

Cost category	Standard quantity	Standard cost per 100 ml
Direct materials: Material A Material B	0.5 kg 0.25 litres	25 15
Direct labour	2 hours	40
Variable manufacturing overhead	30 minutes	25

1. The company targets to sell 48,000 cosmetic tubes per year at a price of 180 per tube.
2. Fixed manufacturing overheads are applied on the basis of direct labour hours. The budgeted fixed overhead of the division including common costs is 1,800,000 annually at a planned activity level of 96,000 direct labour hours per year.

	Quantity	Total revenue/ costs ()
Production and sales	4,200 tubes	747,600
Direct material purchased: Material A Material B	2,200 kg 1,125 litres	121,000 66,375
Direct material used: Material A Material B	2,000 kg 1,050 litres
Direct labour	8,800 hours	180,400
Variable manufacturing overhead	2,050 hours	106,600
Fixed manufacturing overhead		180,000

3. The actual data retrieved at the end of the month is as follows

	Quantity	Total revenue/ costs ()
Production and sales	4,200 tubes	747,600
Direct material purchased: Material A Material B	2,200 kg 1,125 litres	121,000 66,375
Direct material used: Material A Material B	2,000 kg 1,050 litres
Direct labour	8,800 hours	180,400
Variable manufacturing overhead	2,050 hours	106,600
Fixed manufacturing overhead		180,000

(25 marks)

(End of coursework task)