Individual Assignment-
Procter & Gamble is the global leader in beauty and personal care. Its key brands here include Olay, Gillette and Pantene. The company has however underperformed some of its rivals including Unilever and L'Oréal, which have made significant gains in the Chinese market to Procter & Gamble's detriment. Procter & Gamble may suffer from being too mid-range for premium-focused China, while too premium for lesser developed emerging markets such as India.
Proctor & Gamble wants to produce a new product codenamed 'Alpha 577'. The product requires a single operation, and the standard cost for this operation is presented below:
Standard Cost Card for ALPHA 577 €
Direct Materials:
kg of material A @ €10 per kg 20.00
1 kg of material B @ €15 per kg 15.00
Direct labour (3 hours @ €9 per hour) 27.00
Variable overhead (3 hours @ €2 per direct labour hour) 6.00
Total standard variable cost 68.00
Standard contribution margin 20.00
Standard Selling Price 88.00
Practor & Gamble planned to produce 10,000 units of Alpha 577 for the month of September 2014. It anticipated that the Budgeted Contribution would be €200,000 and that they would have budgeted fixed costs of €120,000 with a budgeted profit of €80,000.
The actual results for October were:
Sales (9000 units @€90) €810,000
Direct Materials:
A: 19,000 kg @ €11 per kg 209,000
B: 10,100 kg @ €14 per kg 141,400
Direct labour (28,500 @ €9.60 per hour) 273,600
Variable overheads 52,000
(€676,000)
Contribution 134,000
Fixed costs (116,000)
Profit 18,000
1. Prepare an original budget statement for October.
2. Preparation of variances, with explanations along with reconciliation from actual to budget.
3. Draft a report which critically analyses the usefulness of variance analyses as part of directing management attention in a business.
3000 words,
Harvard 5 references.