Agm.Com Case Analysis

Agm.com Case Analysis

1. What were the factors that caused actual quarterly income to be less than budgeted? What was the quantitative effect of each of these factors?
- In order to find out the factors that caused the less actual quarterly income, we did analysis on variances. Sales variance, production cost variances and overhead variances are calculated as follows:
- Sales Variance Actual
Price($) Budgeted
Price($) Actual
Quantity Sold(Unit) Budgeted
Quantity Sold(Unit) Price
Variance
($) F/U Quantity
Variance
($) F/U
Round 22 25 1100 1000 (3300) U 2500 F
Square 35 34 3900 4000 3900 F (3400) U
Oval 42 45 2250 3000 (6750) U (33750) U
Total 7250 8000 (6150) U (34650) U
- Ss
-

o Figures in bracket are unfavorable variances, the factors that caused the less actual quarterly income. o As you can see on the chart above, the biggest factor causing the less actual quarterly income is total sales variance with unfavorable figures, price and quantity variance, summing up to $40,800. o Price decrease and wrong estimation on the quantity sold for Oval basket would be considered as main reasons for causing the factors mentioned above.
- Production Cost Variance (Direct Material + Direct Labor) Actual
Price
($) Bud.
Price
($) Actual
Quantity Used
(Unit) Budgeted
Quantity
Used
(Unit) Price
Variance
($) F/U Efficiency
Variance
($) F/U
Round Reed 1.44 2 1200 1000 -672 F (400) U Handle 3.9 4.1 1200 1000 -240 F (820) U Direct Labor 8.16 6 720 500 (1555) U (1320) U
Square Reed 1.92 3 4100 4000 -4428 F (300) U Handle 5.6 5.5 4100 4000 (410) U (550) U Direct Labor 10.2 9.6 3075 3200 (1845) U -1200 F
Oval Reed 3.6 5 2700 3000 -3780 F -1500 F Handle 6.24 6 2700 3000 (648) U -1800 F Direct Labor 17.68 14.4 3510 3600 (11513) U -1296 F
Total (6851) U -2406 F

Wage
($/DLH) Reed
($/lb) Reed
(lb/Round) Reed
(lb/Sqr) Reed
(lb/Oval) Handle
($/Round) Handle
($/Sqr) Handle
($/Oval)
Actual 13.6 4.8 0.3