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Vericone Ltd . manufactures speciality meat pies, which it sells in bulk to delicatessen shops.The only variable cost is raw material,which consits of three grates
Vericone Ltdmanufactures speciality meat pies, which it sells in bulk to delicatessen shops.The only variable cost is raw material,which consits of three grates of raw meat.The standard cost of the raw materials used in the manufacture of each kilograms of speciality meat pie is as follows:
Raw material Kilograms Standard Price per kilogram
Type A $
Type B $
Type C $
Total Input
Normal loss of input
Output
In preparing its budget for the company assumed that there would be a market in Ireland for kilograms of speciality meat pie and that Vericone's product would have a share of this market.The budget also assumed a selling price of $ per kilogram for Vericone's product.
However,during both Vericone and its competitors were adverly affected by diminishing consumer confidence in meat products.The actual total market size was only kilograms of speciality meat pieinstead of the antcipated killogramsand Vericones sold only kilograms of its product.
The managing director of Vericone Ltdrecently explained how his company attempted to respond to the difficulties which is faced in:"First, we reducedour selling from $ to $; this was a modest price reduction in comparison with those of our smaller competitors.Second, we took advantage of falling markrt prices for some of the types of meat which we use as raw material for our product.With benefit of hindsight, we should perhaps have done more to increase consumers' confidence in the safety and quality of meat products in general and our own product in partcular."
The actual raw materials used by Vericone in were as follows:
Raw material Kilograms Actual Price per kilowgram
Type A $
Type B $
Type C $
Total
Vericone had no opening or closing stocks of raw materials or finished product.
Requirements:
a Compute Vericone's budget and actual total contribution for
b calculate Raw materials price variance, raw materials yield variance, raw materials mix variance, sale price and sales volume.
C Break down the sales volumevariance into market size,and market share variances.DCritically evaluate the performance of Vericone Ltd in supporting your answer by reference to the variances which you have calculated.
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