Variance Analysis and Report

The financial year (20CY+1) has passed, and you are to calculate and analyse variances against budgets. Consider the following information:

	Amount
Sales
Sales	$ 1,600,000
Operating Expenses
Rent	$24,000
Utilities	$5,548
Advertising	$6,000
Salaries	$126,000
Miscellaneous	$2,400
Total Production Cost	$620,000

1. Calculate the variance between the budgeted sales, operating expenses, and budgeted production costs against their actual costs.
2. Interpret if the variance is favourable or unfavourable.

Percentage values must be rounded off to two decimal places.

	20CY+1 Budget	20CY+1 Actual	Variance $	Variance %	F/UF
Sales ($)	1037667	1600000		54%	F
Administrative Expenses
Rent ($)	24000	24000	0	0%
Utilities ($)	3800	5548	1748	46%	U/F
Advertising ($)	12000	6000	6000	50%	F
Salaries ($)	120000	126000	6000	5%	U/F
Miscellaneous ($)	3600	2400	1200	33.33%	F
Total Operating expenses	163400	163948	548	0.34%	U/F
Total Production Cost	874267	1436052	561785	64.26%	U/F

Review the 20CY+1 budget and write a short report listing 2 processes that should be implemented to improve productivity in 20CY+2