Own sub unit of winter sport company had the following financial results last month: Monthly Performance Report Product actual budgeted variance variance percentage Sales 545,000 500,000 Less variable expenses 387,000 375,000 Contribution margin 158,500 125,000 Less direct fixed expenses 10,380 10,000 Segment margin 148,120 115,000 Less common fixed expenses 52,000 40,000 Operating income 96,120 75,000 Required: 1. Based on the performance evaluation report in the question, compute variance and variance percentage for its subunit (round to three decimal places) (hint: indicate favourable or unfavourable variance) 2. Assess whether only unfavourable variances should be investigated or not. 3. Analyse whether the management should place equal weight on each of the $12,000 variances.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Own sub unit of winter sport company had the following financial results last month:
Monthly Performance Report
| Product | actual | budgeted | variance | variance percentage |
| Sales | 545,000 | 500,000 | ||
| Less variable expenses | 387,000 | 375,000 | ||
| Contribution margin | 158,500 | 125,000 | ||
| Less direct fixed expenses | 10,380 | 10,000 | ||
| Segment margin | 148,120 | 115,000 | ||
| Less common fixed expenses | 52,000 | 40,000 | ||
| Operating income | 96,120 | 75,000 |
Required:
1. Based on the performance evaluation report in the question, compute variance and variance percentage for its subunit (round to three decimal places) (hint: indicate favourable or unfavourable variance)
2. Assess whether only unfavourable variances should be investigated or not.
3. Analyse whether the management should place equal weight on each of the $12,000 variances.
4. Using balance scorecard perspective, evaluate the performance of this subunit.
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