Variance Analysis

Performance evaluation (variance analysis)

Li Fen Holland (Ltd) is a manufacturer of deepfreeze Vietnamese meat rolls for the delivery to supermarkets. The raw materials costs (meat) are € 0.40 per meat roll. (0.1 kilogram of meat for € 4.-- per kilogram). The other variable costs (costs of packing) are € 0.02 per meat roll.

All produced meat rolls will be sold instantly: There is no inventory/stock of meat rolls.

The budgeted indirect fixed costs are distributed as follows:

Costs management | € 200,000 | |

Costs administration | € 150,000 | |

Costs production installation | € 150,000 | |

Costs production staff | € 700,000 | |

Costs sales department | € 200,000 | |

Total budgeted fixed indirect costs | | € 1,400,000 |

These figures apply to the budget for the year 2009.

The budgeted market share of Li Fen Holland ltd is 10%.

The budgeted sales price of the meat rolls of Li Fen Holland is € 1.20 per meat roll.

The budgeted sales of Li Fen Holland for the year 2009 amount to 2,250,000 meat rolls.

The regular(normal) sales and production of Li Fen Holland is 2,350,000 meat rolls.

The actual results of the 2009 are the following.

Sales 2,000,000 meat rolls

Income statement

Revenues | | €2,440,000 |

Material (meat) | 180,000 kg meat | € 864,000 |

Other variable costs | | € 100,000 |

Gross margin | | € 1,476,000 |

Costs management | | € 250,000 |

Costs administration | | € 180,000 |

Costs product installation | | € 132,000 |

Costs production staff | | € 616,000 |

Costs sales department | | € 176,000 |

| | |

Result | | €122,000 |

The budgeted market share of Li Fen Holland ltd is 10%.

The actual market share of Li Fen Holland is 12,5% in 2009

The budgeted selling price of the competitors of Li Fen Holland ltd was € 1,10. The actual selling price of

the competitors of Li Fen Holland ltd was € 1,18.

Question Determine the flexible budget

| Operating budget | Flexible budget | Actual...