Variance in Assessing Performance and Decision Making

Detailed understanding
variance in assessing
performance and
decision making

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
1. Sales price variance and sales volume contribution variance..................................................1
2. The material price planning variance and material price operational variance.......................3
3. Change in operation and critical analysis of merits and demerits of using variance in
assessing the performance of managers.......................................................................................5
PART B...........................................................................................................................................7
1. FamaQ gives XLG competitive advantage..............................................................................7
2. Demand for chemical X and Y has increased by 45% which is likely to continue according
to market research........................................................................................................................8
3. The cost of making a unit of Fama Q in the UK is £3 with delivery times reducing by 15
working days................................................................................................................................9
CONCLUSION................................................................................................................................9

INTRODUCTION
Management accounting is the process of analysing internal reports and determining actual
position of business so that it could be assessed that all the plans that were formulated previously
are able to result positively or not. It is very important for all the organisations to make sure that
they are using correct approaches for conducting management accounting on yearly basis
(Agrawal and Cooper, 2017). It is very important to make sure that all the predetermined
objectives are achieved. Present report is based upon XLG which is a cleaning product company
located in eastern Britain. It is producing two different types of cleaning agents which are
chemical X and Y. Present assignment covers various topics such as sales price, volume
contribution variance, material price planning and operational variance and merits and demerits
of using all the variances to asses the performance of performance. Apart from this, the risk
which may take place when the chemical famaQ will be imported and the way in which the risk
could be resolved are also covered in this report.
PART A
1. Sales price variance and sales volume contribution variance
There are providing information’s in order to calculate sales price variance as well as sales
volume contribution variance. This information is related of chemical X and Chemical Y such
as:
Given Information:
Total units sold: 1600
Material price variance: £ 27000 Favourable
Sales and Contribution:
Chemical X Chemical Y
Budgeted total sales 595 units 595 units
Actual Sales Volume 850 units 750 units
Standard sales price £ 35 £ 30
Actual sales price £ 45 £ 37
1