Management Accounting Report: XLG Company's Financial Analysis

This report provides a detailed analysis of XLG, an eastern British cleaning product service, focusing on management accounting principles. It examines sales price variance, sales volume contribution variance, material price planning and operational variances, and the merits and demerits of using variance analysis to assess manager performance. The report includes calculations and interpretations of variances for chemical products X and Y, highlighting their impact on XLG's financial position. Furthermore, it addresses the competitive advantage of FamaQ and the impact of increased demand on the company. The report also explores the benefits and drawbacks of variance analysis, emphasizing its role in cost control, performance evaluation, and budgetary adjustments. The analysis considers the implications of operational changes and the challenges of behavioral issues in performance management.

Management Accounting

Contents
INTRODUCTION...........................................................................................................................................3
PART A.........................................................................................................................................................3
1. Sales price variance and sales volume contribution variance...............................................................3
2. The material price planning variance and material price operational variance....................................5
3. Change in operation and critical analysis of merits and demerits of using variance in assessing the
performance of managers........................................................................................................................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.............................................................................................................................................12
REFERENCES..............................................................................................................................................13

INTRODUCTION
Accounting is the method of tracking, categorizing, analyzing, reviewing and evaluating the
company's overall financial activities for the advantage of administration and other parties
involved such as stakeholders, investors, banks, customers, workers and administration.
Therefore, it is associated only with facets of financial statements and corporate decision taking.
Accounts administration is not a common accounting framework (Al-Mawali and et.al, 2018).
This could be any method of accounting that would allow a company to be operated more
efficiently and economically. It is mainly concerned with supplying managers with knowledge of
economics to achieve the organizational goals. The present study was depending on XLG, an
eastern British cleaning product service. This produces two different kinds of cleaning agents
that are chemical X and Y. Present assignment include variety of topics including such sale
price, volume allocation variance, material price preparation and operational variance and
benefits and drawbacks and use all differences to evaluate efficiency. Aside from all this, this
study also addresses the issues that may occur whenever the chemical famaQ is manufactured
and the direction the threat could be addressed.
PART A
1. Sales price variance and sales volume contribution variance
There are mentioned all the required information which is required for the calculation of
Sales price variance and sales volume contribution variance:
Given Information:
Total units sold: 1600
Material price variance: £ 27000 Favorable
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: This is the gap for the total amount of sales between the average sale price
and the regular selling price. This can be measured as variation in the price of the item. This is
because of the disparity between the real sales price as well as the normal sales price for the
same sale amount (Andersén and Samuelsson, 2016).
Description Actual Price Standard
Price
Differences Actual
Volume
Sales Price
variance
£ £ £ £ £
Chemical X 45 35 10 850 8500
Favourable
Chemical Y 37 30 7 750 5250
Favourable
Interpretation: Thus according approximation, after positioning the proportions in the equation,
the measurements of Chemicals X and Y are computed and the results 8500 in favor of X and
5250 in favor of Y are obtained. Variances in revenues are the real distinction in overall or
definition prices, and both X&Y chemicals are in a stable position for the XLG Company to
benefit.
Sales volume contribution variance: This is the variation attributed to the disparity between the
budget allocation and the real amount of products sold at the regular price It can be measured as
a variation in material usage. Estimated sales can vary from normal sales. In these other terms,

the planned sales volume at the standard price will differ from the expected volume sales at the
comparable rate. Therefore, the variation is the product of the discrepancy between the volume
of products sold being needed to pay and the total price (Chan, 2015). To balance real and
planned income, the difference in the sales volume is measured as a function of:
 Normal par unit size, and
 Differences between actual results with budgeted components of sales
Description Actual sales
volume
Budgeted
sales volume
Differences Standard
margin
Sales volume
variance
£ £ £ £ £
Chemical X 850 595 255 35 8925
Favourable
Chemical Y 750 595 155 30 4650
Favourable
Interpretation: From the above question, it was explained that the computation of the sales
variance enables all products to be positioned according to method and outcomes are obtained.
Findings for X, 8925 in a positive way and for Y, 4650 positive from assessment transaction
value participation variance. Chemical X is in a more beneficial position with regards to the
performance of sales volume variance.
2. The material price planning variance and material price operational variance
Material price operational variance: Operating variances reveal the direction to which
achievable targets have been achieved (i.e. the adapted guidelines). The operational variances
should be measured after the planning variances have been identified and are therefore a
practical method of measuring them (Erokhin and et.al, 2019).

Material price planning variance: "Planning variances help to clarify the degree to which the
initial norm has to be changed to compel to change in operating condition between the current
predicament and the degree to which the requirement was actually measured implies, in essence,
that the existing requirement is revised to be a reasonably achievable goal under present
circumstances (Krishnan, 2015).

3. Change in operation and critical analysis of merits and demerits of using variance in assessing
the performance of managers
Variance Analysis is the method of evaluating the disparity between normal and real costs.
Using it, it can be evaluated whether or not the projections made by top management throughout
the year will suit the exact statistics. Using variance analysis, corporations' top-level
management will evaluate market results so often as managers. It's one of the powerful strategies
that could direct the board members to evaluate whether the forecasts made by top management
are capable of meeting the real expenditure incurred by all the procedures. There are different
types of benefits and challenges of someone using variance data to evaluate management quality
(Lestari, 2015). It is really necessary for all organizations' senior individuals to try to ensure that
they are all knowledgeable of themselves because it can cause effect on the corporate plans that

will be developed for the successful implementation of future projects. Some of the major
advantages of enterprise variance analysis are that it will promote the study of the current market
situation. In addition, it may also allow great executives to monitor the quality of all employees
employed inside the company as a greater discrepancy between the real and standard cost will
supply all necessary data of lesser estimation skills. This will show management inadequate
results. Moreover, the administrators will better conduct all their tasks whenever the discrepancy
is small between planned and real expenditures. There are mentioning the advantage and
disadvantage of variance analysis for performance management such as:
Advantage: As differences are used by organizations to assess the output of managers and other
reasons then they that result in different merits. These are all as wants to follow:
Analysis of accountability: A framework of transparency within the corporation may be
developed with the aid of variance analysis or simulations. Whenever a owner takes steps for the
potential, the primary responsibilities would be to be responsive for these in order to assess their
results. If the findings are detrimental it will be very necessary for them to assume
accountability. If the degree of transparency in XLG is poor then the bad performance of the
management will be demonstrated (Mitter and Hiebl, 2017).
Setting system for roles and responsibilities in context of an organisation: Variance analysis
is being used to set up a framework for proper assigning of all role and obligations to the former
employees. The top management will, with the aid of it, assess the skill of all the management
and instead create the structure that will help achieve the long-term goals and priorities.
Regulations and productivity inside the company could be strengthened and strengthened with
the aid of it.
Controlling expenses: Analysis of variance plays a crucial role in monitoring trends so when the
outcomes of differences are adversely affected then the supervisors can take the appropriate
judgments to regulate the problematic thinking. Seek to find the reason for the negative impacts
to better function the management so they take care of relevant behavior so that they can boost
the efficiency of the company. The real selling is very important in the case of XLG Company
due to the increased demand resulting in the unfavorable variance. The administrators should

have bought more inventory than the regular one to comply with this case, because it would have
contributed in important determinants.
Evaluation performance: Examination of variances is used to assess company performance by
comparing whether or not the desired effects are consistent with the estimates money earmarked.
This also serves to evaluate the success of managing supervisors as it will show good results
whenever the differences result favorably. If the outcomes are detrimental then it will reinforce
that perhaps the supervisors have created no attempts to ensure right choices or estimates (Ojua,
2016).
Adjusting budgeted estimation: Analysis of variances promotes the modifications of actual
expenditure. If such justification for the undesirable variance in standardized measures is
incorrect calculation then the results should be changed and modified. When the leaders are
intensely aware of the things then this will help to easily assess their efficiency and increases
employee productivity. It is one of the major advantages of someone using variations to test
executives' output in XLG Company.
1. It enables for controlling costs and measurement of projects by contrasting exact numbers with
those project budget. Management accounting aims at manufacturing an item as per established
performance standards at the least total price.
2. Pinpoint unnecessary management liability so that appropriate steps can be taken.
3. It encourages workers to meet set goals.
4. It promotes contact inside an organisation , for example among top managers or supervisors,
while enabling workers to work optimally
5. It guarantees the company is in good condition
6. This means that administrators and subordinates are centered, and hence facilitates the
alignment of performance.
Disadvantage:

1. This enables organizations to be arrogant as they continue to ignore certain critical resources
which can benefit the companies (Oyewo, 2017).
2. Subordinates can be forced to cover up unsafe conditions or to take measures which are not in
the best interests of the organization to ensure that the differences are advantageous.
3. There may be a propensity to prioritize compliance with requirements to neglect other critical
goals including such performance maintenance and enhancement, on-time logistics and customer
service.
4. It prohibits innovation because employees would not want to implement innovations,
particularly if such technologies may lead to negative initial variances.
5. This may lead to misleading judgments that may outcome in the decline of the institution, as
the information used in the calculation of the differences may be incorrect
Behavioral issue: Analysis of variance can contribute to brief-terms due to its inherent
propensity towards validated and short-term goals, as well as performance. Besides this, whether
there is bad impression about it so the non - optimal behavior among the workforce is
encouraged. One instance of this is trying to integrate slacks in the spending plan. This is one of
the key demerit points of using variance analysis to determine whether or not the participants
performed effectively (Tan, 2016).
PART B
1. FamaQ gives XLG competitive advantage
XLG is a pharmaceutical corporation that works in the United Kingdom and a few other
European places. The marketplace in which it conducts transactions is very challenging and one
of the key chemicals that give it competitive edge is the imports famaQ from Brazil. The
nationwide lockdown ended up taking part in the second qtr of March of 2020, and it was
imposed by UK relevant authorities. Because of this, the individual's disease outbreak opted to
expand its online deals so it could handle all of the lockdown difficulties that are occurring.

2. Demand for chemical X and Y has increased by 45% which is likely to continue according to
market research
It would be very necessary for the organization to ensure it tackles all of the negative
consequences that could arise from this. Despite of Lockdown it would be unlikely for XLG to
import famaQ from Brazil. Besides that, which ought to be transported, it can lead to multiple
dangers. There are greater chances of transmitting the corona virus, extended time delivery,
additional cost etc. After that, if it is not to be manufactured it may well lead to a decrease in
competitive edge since the key chemical that aim to ensure that is famaQ. In additament, the
requirement for chemicals X and Y has been forecast to reach by 45 percent and is sure to persist
as per the market research. Another of the key options that the company should concentrate on is
producing the famaQ in the UK so it can satisfy the needs of its consumers (Van der Stede,
2016).
3. The cost of making a unit of Fama Q in the UK is £3 with delivery times reducing by 15
working days
When it is made in the UK, the delivery of the goods can be shortened by fifteen days,
which ensures that the company will begin production earlier. With the exception of this, the
production cost per unit of famaQ in the UK would be 3 pounds which again is small in
comparison to the manufactured cost of 3.7 pounds a product. This indicates that the company,
instead of just sourcing it from Brazil, will make famaQ in the UK, because it would benefit in
different business advantages. Some of its major advantages include:
• If famaQ is manufactured it would promote the company as the production costs are very low
relative to the manufactured costs (Velasquez, Suomala and Järvenpää, 2015).
• The delivery date will be shortened by 15 days, so that development will start sooner and
satisfy economic growth.
• The risk of corona disease spreading would be zero if the famaQ chemicals are generated
instead of imported from Brazil.
• It will be very challenging to buy things at Lockdown so producing famaQ in the United
Kingdom is the best option for all activities to be carried out regularly in the potential.