Question-
Alphasport Pic is a company which manufactures a range of sports products, including footballs designed for children. These football products require bladders, leather, packaging materials, and labour as direct inputs to the production of the product. Alphasport's budget for the month of March 2010 was as follows:
Budget for March, 2010
|
Budget for March, 2010
|
|
£
|
£
|
£
|
|
Sales: (6,000 units @ £48 each)
|
6,000
|
48.00
|
|
288,000
|
|
Variable costs:
|
|
|
|
|
|
Bladders (6,000 units @ £3.00 each)
|
6,000
|
3.00
|
18.000
|
|
|
Leather (200 ten-hide bales @ £456)
|
200
|
456.00
|
91,200
|
|
|
Packing materials etc.
|
|
|
7,800
|
|
|
Direct labour (5,000 hours @ £6.00 ph)
|
5,000
|
6.00
|
30.000
|
|
|
Total variable costs
|
|
|
|
(147,000)
|
|
Fixed costs:
|
|
|
|
|
|
Administrative expenses
|
|
|
25,434
|
|
|
Salaries
|
|
|
49,566
|
|
|
Total fixed costs
|
|
|
|
(75,000)
|
|
|
|
|
|
|
|
Budgeted Net Profit
|
|
|
|
66,000
|
Due to an unexpected machine breakdown during March, Alphasport was only able to manufacture 60% of the budgeted production time (5,000 hours) and was unable to sanction any overtime, although the direct labour force was paid in full for the original budgeted hours. Actual costs and output during March were recorded as follows:
|
Actual for March, 2010
|
|
£
|
£
|
£
|
|
Sales (4000 units at £54 each)
|
4000
|
54.00
|
|
216,000
|
|
Variable costs:
|
|
|
|
|
|
Bladders (4000 units at £4.20 each)
|
4000
|
4.20
|
16,800
|
|
|
Leather (100 ten hide bales at £800 each)
|
100
|
800.00
|
80,000
|
|
|
Sundry and packaging materials
|
|
|
5,200
|
|
|
Direct labour (5000 hours at £6.50 per hour)
|
5000
|
6.50
|
32,500
|
|
|
Total Variable costs
|
|
|
|
134,500
|
|
Fixed Costs
|
|
|
|
|
|
Administrative expenses
|
|
|
26,310
|
|
|
Salaries
|
|
|
49,890
|
|
|
Total Fixed costs
|
|
|
|
76,200
|
|
Actual Net Profit
|
|
|
|
5,300
|
Required:
(a) (i) Prepare a statement reconciling the budgeted profit with the actual profit and state the variances in the way you consider would be most helpful to management.
(ii) Comment briefly on any apparent (i.e. plausible) inter-relationships between variances.
(b) Consider the following statement: "There are more comprehensive models of management control and performance measurement than variance analysis available now such as the balanced score card that tries to incorporate other methods of observing good management practice."
With reference to the above statement, compare and contrast variance analysis and balanced scorecard approaches as management tools for cost control and performance evaluation.
Additional information-
This question relates to Accounting and it discuss about preparing reconciliation statement with budgeted profit and actual profit and commenting about inter-relationships between variances.
Word limit 500.