The Peyton Company Case

Decent Essays
The following report will be on the Peyton Company and show the variances and the reasons for the variances. The analysis of the operating budget will be a brief discussion on the companies variances, I will compare them to the budget and them compare the actual results. There are different operating budgets that have various differences in costing methods, sales projections and labor based on the profit margin desired. Therefore, I shall show the components of the variances that have a contributing factor to the cause, ending with a conclusion as to the key factors that the results can lead you too. These factors will help Peyton decide and analize the effecintcy of their production in many areas by analyzing these reports. How can they effective and efficiently run the day to day operations and still be within budget and be profitable? The operating budget is a key factor in answering this question. The formulas used to assist in this process for cost variances are as follows:
Reference 1 is about the measures of how well a business stays within
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This helps them determine whether or not they are running ineffitently or efficiently. In accounting terms are they favorable or unfavorable results when analyzing these reports. The cost/price variance of the direct materials was favorable do to the variance of zero. What this can mean is there was no change in the unit cost of materials. So the company made the right decision to buy the materials at an optimal price in order to increase the efficiency of the variance. The labor cost were not within budget therefore, it was unfavorable for the company because the expenditures were more than predicted in the primary budget. This can show that there are problems in training or productivitiy of the workers within the
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