Boston Creamery

1. Frank Robert’s analysis is superficial and self-serving. His boss is correct in stating that the variances Frank shows do not properly reflect true costs and variances, as they are not adjusted for actual volume. As example, when the Variable Costs are adjusted for Actual Units vs. Budgeted, the performance picture changes dramatically showing Operations performed exceptional well.

This analysis shows that Operations contributed $205,577 of the profits rather than the ($58,000) unfavorable that Frank shows in his review, a swing of over $260,000. The cause is Frank used the budget per unit cost to show unfavorable results rather than determining the Budgeted Per Unit cost and then applying to the Actuals.

2. I would speculate that Parker would align his results to favor and highlight his results – which are extremely good. For example, Parker would highlight although Cartonizing was $34,400 over budget, this created a savings in Delivery of $86,940 as costs shifted from Delivery to Cartonizing, but improved dramatically. I would speculate Parker’s analysis would look something like this:

When you normalize the variable cost items from the budget items, you can see that manufacturing was not a deficit, but rather and contributor to the success of the business. The only area that was not a contributor in Parker’s span of control was Advertising.

3. The company performed well at all levels. Budget for fixed cost should be commended as the Actual to Budget was very close with the minor exception of Repairs. An increase in Repairs can be attributed to additional wear and tear on machines as production levels were ramped to meet demand. The rise in Cartonizing should have been better anticipated as the company shifted the way they cartonized and loaded delivery trucks. Both the budget for Delivery and Cartonizing should have been adjusted to reflect the change in the business

Additionally, Variable Costs should be highlighted as the...