Boston Creamery

In: Business and Management

Submitted By sarahcarter1313
Words 1098
Pages 5
1. The variance analysis schedule that Frank Roberts proposed was not necessarily the best representation of the variances for Boston Creamery. Roberts’ report stated a favorable variance of $71,700 coming mainly from sales volume. He used the revised budgeted operating income and the original budgeted income to come up with the sales volume number. The budget was not detailed as to what accounted for the differences though. That would be the first change to the variance analysis report, provide a clearer depiction of the results. He should show the effect of the changes in market size. The market size variance was actually 117,642 favorable (5,968,366-5,720,329). The suggestions offered by Jim Peterson can be incorporated into the schedule without being too technical. There may be a lot of numbers but the results are far more informative. By also looking at month to month changes to sales and operational costs they would have a better estimate and the figures would be available sooner rather than waiting until the spring of 1973. John Vance’s appendix breaks the profit planning analysis down month by month and he shows the importance of tracking actual results. For example, in January 520,000 gallons of ice cream were actually sold. They based the analysis on the forecast of only 495,000 gallons. The actual revenues for January are $28,875 under the forecast for the actual sales. The earnings statement, which is Exhibit C in the Appendix to the Case, shows that the actual manufacturing costs were $593,287 compared to the budgeted costs of only $570,537. Thus, the variance due to operations was a negative $22,750. The actual operating profit was only $92,383 compared to the budgeted $115,133. Thus, the negative variance due to volume and mix was a negative $6,125. Adding the two variances gives the total negative variance of $28,875. While it is…...

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