A) Identify 2 weaknesses in the production performance report Spitzer Specialty
ID: 2548181 • Letter: A
Question
A) Identify 2 weaknesses in the production performance report Spitzer Specialty Furniture Bookcase Production Performance Report For the Month Ended June 30 Actual Budget Variance 2,500 $161,000 $137,500 $23,500 F 3,000 500 F Units Sales Revenue Variable production expenses: Direct material Direct labor Overhead Fixed production expenses: Indirect labor Depreciation Taxes Insurance Administrative expense Marketing expense Research & development Operating profit 23,100 20,000 3,100 U 18,300 15,000 3,300 U 60,200 51,250 8,950 U 9,4006,0003,400 U 5,500 5,500 2,400 2,300 100 U 4,500 4,500 12,000 9,000 3,000 U 8,300 7,000 1,300 U 6,000 4,500 1,500 U $11,300 $12,450 ($1,150) UExplanation / Answer
The two weaknesses in the production performance report are mentioned below:
A) The company has achieved a sale of 3000 units as compared to the budgeted sale of 2500 units. However, the variances reported for direct material and direct labour are unfavourable as these have not been adjusted to reflect the change in variable cost due to change in quantity. Lower per unit actual cost has been achieved ,however the variance reported is unfavourable which is incorrect.
B) The budgeted taxes are 2300 . However, since a higher profit is made, tax as a percentage of profits shall be higher. This has not been incorporated in the production performance report and an unfavourable variance is reported portraying a wrong picture.