Answer Q1 a Requirements:Q1 (a)Prepare a statement that reconciles the budgeted gross profit for Active Now in 2020(as per the static budget) to the actual gross profit earned in the year, showing salesand cost variances in as much detail as the information permits. Active Now is an Irish company, owned and managed by partners Frances and EvelynO'Connell, which manufactures specialised sporting equipment. Due to an expandingfitness market, Active Now has experienced considerable growth since it was formedless than three years ago.You have recently commenced work as a management accountant at Active Now andhave proposed the introduction of variance analysis to improve the company'smanagement control processes. However, Frances and Evelyn are unconvinced ofthe benefits of your proposal. They believe that Active Now is performing well andhave provided you with the following report to demonstrate that the profit achieved in2020 was higher than budgeted.2020StandardStaticActualper unit -€Results -Budget -€€Sales revenue10.006,000,0007,275,000Manufacturing costs:Material: 0.10 kg @ €20 per kgLabour X: 0.1 dlh* @ €10 per dlhLabour Y: 0.05 dlh* @ €15 per dlhVariable overhead: 0.15 dlh* @ €12 per dlhFixed overhead2.001.000.751.802.451,200,000600,000450,0001,080,0001,470,0001,552,500783,750627,0001,485,0001,500,000Gross profit2.001,200,0001,326,750* dlh = direct labour hoursYou examine Active Now's records for 2020 and establish that the actual sales volumewas 25% higher than originally budgeted. Due to a change in supplier, the actual pricepaid for the materials used in production during the year was €23 per kilogram. Withregard to both labour types, a lack of staff training resulted in a 10% increase in theactual time taken to produce each unit during the year. As per its policy, Active Nowdid not have any inventories at the beginning or end of 2020.

The reconciliation statement shows the main reason for the difference between the static and actual…

Requirements: Q1 (a) Prepare a statement that reconciles the budgeted gross profit for Active Now in 2020 (as per the static budget) to the actual gross profit earned in the year, showing sales and cost variances in as much detail as the information permits.

Requirements: Q1 (a) Prepare a statement that reconciles the budgeted gross profit for Active Now in 2020 (as per the static budget) to the actual gross profit earned in the year, showing sales and cost variances in as much detail as the information permits.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter13: The Balanced Scorecard: Strategic-based Control

Section: Chapter Questions

Problem 21P: At the end of 20x1, Mejorar Company implemented a low-cost strategy to improve its competitive...

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