A financial analysis report for Tricol plc
Outcome 3and4
Class;10E6
Name:Ma boda
SCN:125099297
Candidate Num:22
Introduction
To operate better in financial aspect, the management of Tricol plc asked me to analyze their financial condition then make recommendations for them.
Findings
Part A
(ⅰ) Flex budget in line with actual activity
Tricol plc Flexed Budget for June |
| Original budget | Flexed budget | Actual results | Variance |
| 2000 units | 1600 units | 1600 units | F/A |
| ￡ | ￡ | ￡ | ￡ |
Direct material | 80,000 | 64,000 | 61,600 | 2,400 | F |
Direct labor | 36,000 | 28,800 | 35,200 | 6,400 | A |
Variable production overhead | 4,000 | 3,200 | 3,200 | 0 | |
Fixed cost | | | | | |
Depreciation | 1,500 | 1,500 | 1,500 | 0 | |
Rent and rates | 2,500 | 2,500 | 2,500 | 0 | |
Administration overhead | 2,000 | 2,000 | 2,200 | 200 | A |
Insurance costs | 2,200 | 2,200 | 2,400 | 200 | A |
Total | 128,200 | 104,200 | 108,600 | 4,400 | A |
| | | | | |
(ⅱ) Variances calculation
Direct material total variance
(Standard units of actual production*standard price) －(actual quantity*actual price)
(4 kg*1,600*￡10) －￡61,600 =￡ 2,400 (F)
Rate of significance: (3.75%)
Direct material usage variance
Standard price*(standard units of actual production － actual quantity)
￡ 10*[ (4kgⅹ1,600) －5,600kg]= ￡8,000 (F)
Rate of significance (12.5%)
Direct material price variance
Actual quantity * (standard price － actual price)
5,600kg*[￡ 10 －(￡61,600/ 5,600kg) ]= ￡ (5,600) (A)
Rate of significance: (8.75%)
Direct labour total variance
(Standard hours of actual production*standard rate ph) - (actual hours*actual rate ph)
[ (2hrs*1,600) *￡9]－￡35,200=￡(6,400) (A)
Rate of significance: (22.22%)
Direct labour efficiency variance
Standard rate ph* (standard hours of actual production － actual hours)
￡9*(2hrs*1,600－3,520hrs)=(2,880) (A)
Rate of significance: (10%)
Direct labour rate variance
Actual hours*(standard rate ph – actual rate ph)
3,520hrs*(￡9*－￡35,200/3,520hrs)= ￡(3,520) (A)
Rate of significance: (12.22%)
Total overhead variance
Total standard overhead for actual production － total actual overheads
(￡18,000/12+￡2,500+￡2,200+￡2,000)- (￡1,500+￡2,500+￡2,200+￡2,400)=￡(400) (A)
Rate of significance: (3.5%)
(ⅲ) Repo坐飞机英文
rt about variances
✧Direct material variance
The direct material total variance can be analyzed in two aspects which are direct materia
l volume and direct material price.
For volume side, as calculated above, the budget volume is 6400kg; the actual volume is 5600kg. So there is 800kg variance which is favorable and each unit variance is 0.5kg. The likely reason causing the variance comes from three aspects. First of all, the company upgraded the production machinery recently, and new machine may u materials efficiently, so it reduced the waste of materials. Secondly, the company switched suppliers and using higher-grade materials can decrea waste of materials too. Finally, the 来月经能喝咖啡吗
company has concluded a hi鲁迅作品
gher-than-expected wage ttlement for production operatives, which will maintain employees with higher skills as well as decrea turnover of employees, and it also can increa efficiency in using materials.
For price aspect, the budget price is ￡10 per kg, and the actual price is ￡11per kg, it is adver that one pound over the budget price. The company switching suppliers may cau the increa of negotiation cost. There may be a long-term relationship between Tricol plc and十三英语怎么读
its old suppliers, so the suppliers may take lots of discounts to the firm. Afte
r changing suppliers, the discount may disappear. Furthermore, higher grade materials incread unit price.
Overall, the total material variance is favorable. ￡8,000 －￡5,600=￡2,400.
✧Direct labour variance
The direct labour total variance is compod of direct labour efficiency variance and direct labour rate variance.
The budget direct labour hours are 3,200hrs and the actual labour hours are 3,520 hrs. There are more 320hrs needed than the budget, and each unit is 0.2hrs, which it is obviously adver. The company upgrading the production machinery may need time for employees to adopt it. Also, employees need training time. The rebuild process of machinery consumed time too. In a word, the chargeable hours have incread.
The budget direct laour hours rate is ￡9 per hour, the actual hours rate is ￡10 per hour. It is adver that one pound higher than budgeted. It is possible caud by both internal a
nd external factors. Higher-than-expected wage ttlement may be internal reason for the variance, and new machinery may be needed to recruit new employees to operate the machinery, which also can increa the expen. For external factors, the changing of labour market may increa labour cost; the government legislation also can increa the labour cost, for example minimum pay.
Both direct labour efficiency and direct labour rate variances are adver, so the direct labour total variance is adver.
✧Overhead variance
As calculated above, total overhead variance is caud by administration and insurance. Each factor has ￡200 variance, so the total overhead variance is ￡400 and it is adver. During the process of changing supplier, the company needed more expen on public relationship or negotiation, in addition, in order to maintain the new machinery, administration cost will be incread too. For insurance aside, the improvement of machinery will need more insurance fees to cover, which also contributes to the increa
of insurance fee of new employees.
