Ferguson Foundry Limited

1341 Words6 Pages
------------------------------------------------- Case: Ferguson Foundry Limited (FFL)

EXECUTIVE SUMMARY

Date: March 10 2013
To: Mark Ferguson, President
From: Carl Holitzner
Re: FFL’s Lower-Than-Budgeted Profit for the Fiscal Year Ended May 31 2010

The major issue is determining why Ferguson Foundry Limited’s (FFL) actual profit was $367,600 lower than budgeted, despite selling 2,000 more wood stoves (12,000 instead of 10,000 units). This will be explained using Variance Analysis to demonstrate the underlying reasons why the company failed to meet its president’s expectations. FFL profit for 2010 was below budget due to many factors both production and marketing related.

From a production perspective, there were 3
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Unit Direct Labor (Basic) = DL Std. Qty. Per Unit x DL Std. Rate Per Hr. = 6 hrs. x $15.00 per hr. = $90

APPENDIX

EXHIBIT 2 | For the Year Ended May 31 2010 | | ACTUAL | FLEX-BUDGET VARIANCE | FLEX BUDGET | SALES-VOLUME VARIANCE | STATIC BUDGET | TOTAL VARIANCE | Quantity (units) | 12,000 | | 12,000 | | 10,000 | | Sales Revenue | $5,700,000 | ($300,000) | $6,000,000 | $250,000 | $5,750,000 | ($50,000) | Variable Costs | $4,515,600 | ($99,600) | $4,416,000 | ($181,000) | $4,235,000 | ($280,600) | CM | $1,184,400 | ($399,600) | $1,584,000 | $69,000 |

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