Management Accounting: Sales Variance, Material Variance, and Performance Evaluation

Management Accounting

Contents
INTRODUCTION...........................................................................................................................................3
PART A.........................................................................................................................................................3
1. Sales price variance and sales volume contribution variance...............................................................3
2. Material price planning variance and material price operational variance...........................................5
3. Critically analyzing key merits and demerits in relation to use of variances in assessing manager’s
performance:............................................................................................................................................7
PART B.......................................................................................................................................................10
1. FamaQ gives XLG competitive advantage........................................................................................10
2. Demand for chemical X and Y has increased by 45% which is likely to continue according to market
research.................................................................................................................................................10
3. The cost of making a unit of Fama Q in the UK is £3 with delivery times reducing by 15 working
days.......................................................................................................................................................11
CONCLUSION.............................................................................................................................................11
REFERENCES..............................................................................................................................................13

INTRODUCTION
Managerial accounting is the method of establishing organizational objectives by defining,
evaluating, analyzing, presenting and transmitting guidance to stakeholders. Accounting
management reports on all accounts designed to remind managers of operating business
processes. This includes information related to the prices of the corporation's goods and services.
Budgeting is also used to measure organizational planning decisions (Agrawal and Cooper,
2017). Accounting firms in the administration use annual reviews to note differences from total
budget outcomes. The study deals with the key elements of managerial accounting required to
quantify the renewable growth of the event. The whole study is composed of 2 parts: A and B.
The first element covers realistic sums linked to various variability estimates are based on the
XLG Business case study. It also includes thorough assessment of the benefits and disadvantages
of incorporating variability in the examination of the results of time management. Whereas the
other component concerns risk, importation of Farma Q and how this can impact XLG Company
throughout lock-down based on the aforementioned study given can result.
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
Sales price variance:
Sales price variation is the difference between the number of amount that a business plans
to charge for its items and/or services, and the sum of funds that it sells things for. Variations in
selling prices are considered to be either "advantageous," or considered expensive greater than
anticipated, or "undesirable" if they operate for much less than the advertised or normal price
(Amiruddin, 2016).
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