Variance Analysis

In: Business and Management

Submitted By ceryskelsee
Words 703
Pages 3
Variance analysis

Item | Budget | Actual | Variance favourable/ adverse | Possible reason for variance | Sales | | | | | Oct | £40,000 | £38,500 | £1500 favourable | There may have been a decrease in the number of competitors in the market or they could have advertised really well. | Nov | £45,000 | £47,000 | £2000 adverse | There may have been an increase in competition in the marketAnd a decrease in demand for the products | Dec | £52,000 | £56,000 | £4000 adverse | There may have been an increase in competition in the marketAnd a decrease in demand for the products |

Item | Budget | Actual | Variance favourable/ adverse | Possible reason for variance | Raw materials | | | | | Oct | £6000 | £5,700 | £300 favourable | They could’ve found a cheaper supplier or there may be a drop in sales | Nov | £8000 | £8,100 | £100 adverse | They may have overspent on raw materials or made more sales meaning they needed to use more electricity and raw materials | Dec | £8000 | £8,500 | £500 adverse | They may have overspent on raw materials or made more sales meaning they needed to use more electricity and raw materials |

Item | Budget | Actual | Variance favourable/ adverse | Possible reason for variance | Wages | | | | | Oct | £6000 | £5,600 | £400 favourable | This could be because they didn’t need seasonal staff in October meaning that they didn’t need to give employees as many hours as they thought. | Nov | £6,500 | £6,350 | £150 favourable | This could be because they didn’t need seasonal staff in November meaning that they didn’t need to give employees as many hours as they thought. | Dec | £6,500 | £6,559 | £59 adverse | They may have gone over budget due to needing more seasonal for Christmas therefore to cope with the demand they will give staff more hours. |

Item | Budget | Actual | Variance favourable/ adverse |…...

Similar Documents

Variance Analysis

...HCA 240 April, 29 2012 Moiz Lalani Variance Analysis Variance Analysis is used to promote management action in the earliest stages. It is the process of examining in detail each variance between actual and budgeted costs to conclude the reasons as to why the budgeted amount was not met (Ventureline, 2012). There are several factors that go into a variance report. One is the assumption of the department. The second is the risk of the assumption. And thirdly the actual expense used to portray the budget. The vice president announces the budget that needs to be met monthly. Upon receiving the monthly budget results, the materials budget was not used properly, and the salary was higher than the planned budget. I will be explaining the reasons as to why the salary bases were higher than the given amount, and the reasons why the materials budget were not met, and also what needs to be done in future to prevent from having to exceed the salary amount. When receiving the monthly budget at the beginning of the month, the managers have to assume how to use the budget amount given wisely. Given that the employees need materials to get the job done, there are separate budget amounts for specific areas that need to be dispersed accordingly. For example, working at a health care industry in the materials management department, the supplies that are needed for the department need to be available in order for the department to run such as: computers, handheld inventory scanners, and......

Words: 915 - Pages: 4

Variance Analysis

...Variance Analysis To complete the following assignment, go to this week's Assignment link in the left navigation. Volume, Risk, and Price Variances Analyze the variances in the following scenario: You are the nursing administrator for a medical group that expects a severe outbreak of the flu this winter. You hire additional staff to treat the patients and administer shots. Your special project budget was for 1,000 hours of part-time nurses’ services at $40 per hour, for a total cost of $40,000. It was expected that these nurses would administer 400 flu shots and treat 1,600 flu patients. The medical group typically charges $50 for a flu shot and $80 for treating a flu patient. Actually, the group had 1,200 patients who received the flu shot and 1,400 who had the flu and received treatment. On average, it was able to collect $55 per flu shot and $70 per flu patient. Compute the volume, mix, and price revenue variances. How did things turn out for the group considering just revenues? How did they turn out from a profit perspective? Use either the approach from chapter 8 or from Appendix 8-A to solve. Clearly label the calculations of the required variances using Excel. Use formulas to calculate the three variances and format the cells to insert a comma if there is more than three numbers and round to the nearest whole number. Explain the meaning of the variances in a two page Word document. Submit to your instructor your two-to-three page Word......

Words: 303 - Pages: 2

Variance Data Analysis

...bubbler was bubbling more air than the air. Discuss why this happened. | 4 | Small bubble size | Present | Much less bubble formation | Present at top | Turbulent | 5 | Medium sized bubbles. Bigger than run 3. | No vortex seen | Less bubble formation | Less foam | Bubbles were seen evenly generated from both bubblers | 6 | Medium sized | Present | Evenly distributed in the bulk with a lot present near baffles | Present at top | Turbulent | 7 | Large | No vortex seen | | No Foam | Bubbles were evenly formed from both bubblers | 5.3 Analysis of Variance in parameters based on pooled data Variance in data was observed in each set of experiments due to a number of factors. These factors include stirrer speed, oxygen content, and the different sizes in air stones. From the ANOVA illustrated in Figure 1, the sources X1, X2, X3, X4 are oxygen flow rate, stone size, stirrer speed, and groups respectively. It is seen that the largest variance occurs at the stirrer speed parameter, with a F value of 24.71 as compared to oxygen flow rate at 1.82, stone size at 1.98 and groups at 0.15. This shows that the stirrer speed plays the most significant role in the variation between the sets of data. One of the reasons that might have caused this outcome was the formation of a vortex at high stirrer speeds. Although a high stirrer speed is needed for even mixing, the vortex formed creates a vacuum around an area this disrupts the mixing of the oxygen. Another factor that might......

Words: 433 - Pages: 2

Variance Analysis

...Variance Analysis A variance is the difference between an actual result and an expected result. The process by which the total difference between standard and actual results is analysed is known as variance analysis. When actual results are better than the expected results, we have a favourable variance (F). If, on the other hand, actual results are worse than expected results, we have an adverse (A). I will use this example throughout this Exercise: Standard cost of Product A $ Materials (5kgs x $10 per kg) 50 Labour (4hrs x $5 per hr) 20 Variable o/hds (4 hrs x $2 per hr) 8 Fixed o/hds (4 hrs x $6 per hr) 24 102 Budgeted results Production: 1,200 units Sales: 1,000 units Selling price: $150 per unit ACTUAL Results Production: 1,000 units Sales: 900 units Materials: 4,850 kgs, $46,075 Labour: 4,200 hrs, $21,210 Variable o/hds: $9,450 Fixed o/hds: $25,000 Selling price: $140 per unit 1. Variable cost variances Direct material variances The direct material total variance is the difference between what the output actually cost and what it should have cost, in terms of material. From the example above the material total variance is given by: $ 1,000 units should have cost (x $50) 50,000 But did cost 46,075 Direct material total variance 3, 925 (F) It can be divided into two sub-variances The direct material price variance This is the difference between what the actual quantity of material used...

Words: 3594 - Pages: 15

Variance Analysis

...Variance Analysis A manager of a variable hospital department has many responsibilities. The manager is accountable for budgeting and to protect profits. The financial manager is responsible for guarding overspending and generating profits. They are active in the budgeting process throughout the fiscal year. The budget department manager communicates with other managers, and accounting departments concerning budget issues, financing, and concerns in the organizations departments. Sometimes situations occur whereas payroll salaries are high and supplies are lower than planned and budgeted. The budget manager is responsible for providing feedback about finances, revenue, and any potential variances in the budgeted costs. This essay will be based on a scenario of salaries that were higher and supplies lower than initially budgeted. This paper will explore variances in the scenario mentioned earlier, and explain the relationship between variance reporting, interpreting variance reporting results, and the results of performance within a health care organization. The hospital variable department has experience a case in which employee salaries are higher than budgeted, while the supplies are lower than initially budgeted. This is the result of an epidemic of asthma patients who were admitted to the hospital over the last three months. The hospital approved overtime to assist in the growing number of patients and to accommodate their needs. In the process of caring for patients......

Words: 866 - Pages: 4

Variance Analysis

...The month budget I received for December clearly shows my salaries budget was higher then forecasted. In December of 2013 my variance financial plan included the salary for the staff in the emergency room. Here we have a break down on the staff, which includes 25 registered nurses, 10 on call doctors and 8 registration clerks. With the nurses salary being ranged from 15.75-24.75 hourly, registration clerks 12.00 hourly and doctors on salary at a set rate of 2,614.40. We have 10 nurse with the pay rate of 15.75 at 40 hours a week that equals to 27,090 a month. 5 nurses are at the pay range of 18.75 at 40 hours a week that equals 16,125. Then there is 5 registered nurse at the pay range of 20.00 a hour at 40 a week that equals 17,200 a month. The remaining 5 nurses are at the top pay range of 24.75 a hour at 40 a week equals 21,285. The 8 registration clerks work 40 hours a week at 12.00 a hour which equals 16,512 a month. At a set rate the doctor’s pay a month comes up to 112,402. When combining the wages the total amount calculated was 210,614 for the month of December. Over-time was not added to this month due to the 2 extra nurses on stand-by. As shown on my variance expense these calculations were correct but lacked unexpected events. Three registered nurses went on a unexpected sick leave on December 15 due to a spread of hepatitis c. Both nurses had to be sent off for testing which cost the company 2,000 and also we had to pay for time off which is their regular pay. 2...

Words: 783 - Pages: 4

A General Model for Variance Analysis

...A General Model for Variance Analysis -important reason for separating standards into 2 categories- price & quantity is that diff managers are usually responsible for buying/for using inputs/these 2 activities occur at diff points in time Variances: difference between standard prices/quantities and actual prices/quantities -act of computing/interpreting variances is called variance analysis -price variance/quantity variance can be compute for all 3 variable cost elements -although price variance may be called diff names, it is computed in exactly the same way -the inputs represent the actual quantity of direct materials, direct labour/overhead used à output represents the good production of the period expressed in standard quantity allowed for actual output Standard Quantity Allowed: amount of materials that should have been used to complete the period’s output, as computed by multiplying the actual number of units produced by the standard quantity per unit Standard Hours Allowed: time that should have been taken to complete the period’s output, as computed by multiplying the actual number of units produced by the standard hours per unit -they are both SHOULD have been used, may be diff from amount ACTUALLY used -when standard cost system is being used, flexible budget is based on the standard quantity allowed for the actual output achieved multiplied by the standard price per unit Using Standard Costs- Direct Materials Variances -after computing the standard......

Words: 443 - Pages: 2

Variance Analysis

... Leslie M. Rogakis HCA 240-0500 03/29/2015 Professor Tirizia York Variance Analysis A variable department manager has many factors to consider when interpreting and analyzing a variance report. Variances can be attributed to factors such as increased or decreased volume, wage increases, cost increases for equipment and cost increases for supplies. Variance reports are a tool that can be utilized to analyze how well a company is doing with meeting current budgetary goals as well as a means for forecasting information for future budgets. In preparing a variance analysis report to be presented to the vice president, the information needs to be simple enough to understand easily, but detailed enough for the information to be useful to the person reading the report. To ensure a well-rounded variance report it should include information such as budgeted values, the actual values for the specific term as well as the overall variance. This paper will explain the relationships between variance reporting, interpreting or analyzing variance report results, and actual results of performance. A variance report is a valuable tool used to analyze a company’s or a specific department’s performance in a given period. When variances in wages occur, there are several factors that could have contributed to that variance. Such factors include higher than expected patients admittance, longer than average patient days and possibly wage increases awarded to staff. An additional factor...

Words: 1238 - Pages: 5

Budgeting and Variance Analysis

...Introduction The objective of the Learning Team D, Mauricio Cruz, Nichole Guerra, Srinivas Sangani, and Sterling Mason is to discuss and write a paper on how budgeting and variance analysis helps managers to make decisions. Budgeting and Variance Analysis The major responsibility of a manager is to plan for future. An organization to be successful, it has to make short-term and long-term plans. These plans sets the organizations objectives and ways to accomplish the goals of the organization. A budget is a formal written plan at an organizational level for the outgoing expenses and incoming revenues for a specific period. The purpose of the budget is to ensure that the funds are available to accomplish the objectives of the organization according to plan, justify the use of funds, and help plan future funding accurately. Budgeting plays a great deal in the helping with management decisions. Knowing and understanding the budget can help ease the decision making. For example, in the retail industry every store has a certain budget that strive to meet. Budgets are created from previous year’s sales and can be adjusted for various reasons. The budget numbers allocate a specific amount of labor. When these budgets are not being met, management is required to cut back on labor. Understanding how to read and forecast budgets can help the decision making process easier. Running sales to labor every day helps the management staff in understanding and budgeting correctly. For......

Words: 743 - Pages: 3

Variance Analysis

...PAPER NOT MINE. DIRECT MATERIALS VARIANCES: Materials purchase price variance Formula: Materials purchase price variance = (Actual quantity purchased × Actual price) – (Actual quantity purchased × Standard price) Materials price usage variance formula Materials price usage variance = (Actual quantity used × Actual price) – (Actual quantity used × Standard price) materials quantity / usage variance formula Materials price usage variance = (Actual quantity used × Standard price) – (Standard quantity allowed × Standard price) Materials mix variance formula (Actual quantities at individual standard materials costs) – (Actual quantities at weighted average of standard materials costs) Materials yield variance formula (Actual quantities at weighted average of standard materials costs) – (Actual output quantity at standard materials cost) DIRECT LABOR VARIANCES: Direct labor rate / price variance formula: (Actual hours worked × Actual rate) – (Actual hours worked × Standard rate) Direct labor efficiency / usage / quantity formula: (Actual hours worked × Standard rate) – (Standard hours allowed × Standard rate) Direct labor yield variance formula: (Standard hours allowed for expected output × Standard labor rate) – (Standard hours allowed for actual output × Standard labor rate) FACTORY OVERHEAD VARIANCES: Factory overhead controllable variance formula: (Actual factory overhead) – (Budgeted allowance based on standard hours allowed*) ...

Words: 310 - Pages: 2

Variance Analysis - Compagnie

...Interest and Taxes = 5065 But Actual Profit earned = 4241 Profit Variance comparing to Master Budget (Profit Plan) = (1047) Unfavorable. But, Profit Variance comparing to Flexible Budget = JUST (824) Unfavorable. Comparing the performance of Spanish division with a flexible budget instead with master budget we reckon that Andres Molas did a fantastic job as a manager of the Spanish region in keeping decrease in anticipated profits as low as possible. He was faced with two prominently unfavorable situations: 1) The average summer temperature was 1.7 degree Celsius lower than anticipated. According to case we can attribute 5.1% decrease in sales due to this climatic condition over which Andres had no control. Also, he was forced to cut his price to remain competitive. 2) Andres was forced to import product from French division as he ran out of capacity several times due to new machines performing inadequately. This added an overhead expense of approximately 2147 (Additional maintenance costs + Transfer costs) Italian Division Units  ('000) Profit Plan (Master Budget)  Profit before Interest and Taxes = 459 Flexible Budget  Profit before Interest and Taxes = 514 But Actual Profit earned = 517 which is almost equal to the profit anticipated in flexible budget. Please refer to a detailed variance analysis below (in Question 2) for Italian Division. From the variance analysis, we reckon that more labor was required for the manufacturing of Ice......

Words: 1018 - Pages: 5

Variance Analysis

...Sharrain Walls Variance Analysis Grand Canyon University: HCA-530 July 5, 2016 Introduction Various reports help with viewing and keeping track of the productivity of a department. Managers find these reports very helpful with assisting to find an issue, trend, overspending, and underspending. A report commonly used is a variance report, which compares the planned amount to the actual amount. This report is critical in determining major decisions and viewing fluctuations. The report can be in the form of a table or graph and can be considered favorable or unfavorable based on the results. Vice Presidents look for the report to be clear and direct. Managers should include all factors associated with the variance report as well as the relationships between variance reporting, interpreting variance report results, and actual reports. Variance Analysis When viewing the results of the report consider the hospital size and utilization of the services offered by the hospital. When performing a variance analysis, relationships can be identified. Favorable (positive) and unfavorable (negative) correlations are critical in business planning. An example would be, variance analysis may show that when sales for product a rise in sales for product B. This type of relationship may be used for success of other products (Cross, N.d.). When using a variance report for forecasting variance data allows managers to identify factors such as seasonal changes for the favorable and......

Words: 650 - Pages: 3

Variance Analysis

...Variance analysisCh 8 Variance analysis The complete list of common variances, together with some potential causes, is as follows: The variance and its calculation | Potential causes of the variance | Material variancesMaterial price variance:Amount of material actually used at actual price compared to what that amount of material should have cost if bought at standard price/unit. | * Wrong standard cost/unit of material * The price of material changed since the standard was set * Exchange rate movements affecting the price of imported material * Poor/excellent buying decisions and negotiation | Material usage variance:Amount of material actually used compared to the standard amount that should be used for the actual output achieved, evaluated at the standard cost | * Wrong standard usage/unit of production * Material of a different quality being purchased (yield affected) * Poor/excellent use of material * Poor/excellent maintenance of machines | Labour variancesLabour rate variance:Amount of labour actually paid for at the actual hourly rate compared to what that amount of labour should have cost if bought at standard hourly rate. | * Wrong standard rate/hour * Unexpected rate of wage inflation * A different mix of labour | Labour efficiency variance:Amount of hours actually worked compared to the standard amount that should be worked for the actual output achieved, evaluated at the standard rate per hour. | * Wrong standard hours......

Words: 581 - Pages: 3

Variance Analysis

...16 Chapter Sixteen Fundamentals of Variance Analysis LEARNING OBJECTIVES After reading this chapter, you should be able to: L.O.1 Use budgets for performance evaluation. L.O.2 Develop and use flexible budgets. L.O.3 Compute and interpret the sales activity variance. L.O.4 Prepare and use a profit variance analysis. L.O.5 Compute and use variable cost variances. L.O.6 Compute and use fixed cost variances. L.O.7 (Appendix) Understand how to record costs in a standard costing system. For the second month in a row, profits at our Bayou Division are down and I don’t know why. We budgeted $190,000 in profit for August, but the actual result was only $114,500. We thought we had developed realistic monthly budgets. I know sales were down some, but I’m not sure that is the only problem there is. I am not one who believes that favorable variances are always “good” and unfavorable variances are always “bad.” [See the In Action item, “When a Favorable Variance Might Not Mean ‘Good’ News.”] I need more information from the analysis if I am going to turn things around. What I need to know is whether we should focus on improving the marketing of the division or if we need to take a look at our manufacturing operations. We don’t have a lot of extra resources here at Corporate, so I have asked Philippe [Broussard, the president of Bayou] to identify the primary cause of the shortfall—revenues or costs—and report back to me next week. If Bayou can’t improve, we may have to dispose......

Words: 19482 - Pages: 78

Applying Analysis of Variance (Anova) and Nonparametric Tests Simulation

...Applying Analysis of Variance (ANOVA) and Nonparametric Tests Simulation RES 342 William Modey   Applying Analysis of Variance (ANOVA) and Nonparametric Tests Simulation ANOVA and Non Parametric tests can help in business endeavors wherever there is two or more variables or hypothesis. The ANOVA and Non Parametric Tests Simulation showed the various ways to do hypothesis testing with two or more hypothesis. Being able to do the various types of testing that come along with ANOVA and Non Parametric data sets is key to making the right decision when having two or more choices. The three lessons that I have learned after doing the ANOVA and Non Parametric Tests Simulation were to thoroughly analyze the presented problem before attempting to make a decision, enlist the help of others when making a decision or choosing a course of action, and to continually improve on decision making skills based on learning from past mistakes made. As a result of using this simulation the concepts and analytic tools that I would be able to use in my workplace are that I am now able to approach a decision making scenario with appropriate knowledge and testing procedures to help make the best decision. The skills that I learned in the simulation, such as the different hypothesis testing procedures, could be key to helping me improve my managerial skills. Based on my passed experiences and current knowledge, I would recommend that the key decision maker take his or her time when......

Words: 396 - Pages: 2

Science of Stupid: Wissenschaft der Missgeschicke | Along with the Gods: T... | Color (MIMORI Ao)