MANAGEMENT ACCOUNTING - REPORT

MANAGEMENT ACCOUNTING - REPORT

INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
1. Sales price variance and sales volume contribution variance..................................................1
2. Material price planning variance and material price operational variance..............................2
3. Critically analysing key merits and demerits in relation to use of variances in assessing
manager’s performance:..............................................................................................................4
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........................................................................................................................7
3. The cost of making a unit of Fama Q in the UK is £3 with delivery times reducing by 15
working days................................................................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
In continuous changing business settings every corporation is facing issue related to making
decisions and manage business in effective manner. Management Accounting is first choice of
managing personnel to deal with such issue as this is wider aspect which offers multiple
techniques and tools to support managerial decision-making framework. The study covers the
major aspects of managerial accounting that necessary to evaluate for business's sustainable
success (Otley, 2016). The entire study consists of 2 parts: A and B. The first part covers
practical sum related to computation of multiple variances based on the case study of XLG
Company. It also covers detailed evaluation about merits and limitations of applying variances in
the assessing managing personnel performance. While the another part covers risk may arise by
making import Farma Q as well as how this may impact XLG Company during lock-down based
on the provided case study.
PART A
1. Sales price variance and sales volume contribution variance
Given Information:
Total units sold: 1600
Material price variance: £ 27000 F
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
Standard margin £ 25 £ 20
1

Sales price variance:
Chemicals X
Sales Price Variance ( X ) = ( Actual Price – Standard Price ) * Actual Unit
= ( 45 – 35 ) * 850
= 8500 F
Chemicals Y
Sales Price Variance ( Y ) = ( Actual Price – Standard Price ) * Actual Unit
= ( 37 – 30 ) * 750
= 5250 F
Sales volume contribution variance:
Sales volume contribution variance =
(Actual number of units sold × Budgeted price
per unit) – (budgeted number of units sold ×
Budgeted price per unit)
Chemicals X
Sales volume contribution variance ( X ) =
( 850 * 35 ) – ( 595 *
35 )
8925 F
Chemicals Y
Sales volume contribution variance (Y) =
( 750 * 30 ) – (595 *
30 )
4650 F
2. Material price planning variance and material price operational variance
2