Reference no: EM132581210
Papaya Partners is a distributor of papayas. They purchase papayas from individual growers and package them in 10-pound cartons for delivery to their various customers, generally supermarkets. Last month, they budgeted to sell $500,000 worth of cartons at a price of $25 each. Actual sales met a budget of $500,000 at $25 per carton.
Management has received cost information based on actual performance and needs to understand the drivers of the overall variance from the budget. They have asked you, as an analyst in their management accounting department, to calculate and explain the variances. The following data has been provided:
BudgetCost of fruit @ 10 pounds per carton $ 200,000
Cost of packaging @ 1 pound per carton $ 10,000
Labor costs @ .5 hourse per carton $ 90,000
Total Cost $ 300,000 Actual Cost of fruit @ 10 pounds per carton $ 244,200
Cost of packaging @ .55 pound per carton $ 11,000
Labor costs @ .75 hourse per carton $ 150,000
Total Cost $ 405,200 Unfavorable variance $105,200.00
Specifically, management needs to know the:
Standard cost per unit (carton)
Actual cost per unit
Direct materials price variances
Direct materials usage variances
Direct labor rate variance
Direct labor efficiency variance
Question 1: In addition, they would like to understand how the variances are calculated and what caused them. They would also like a recommendation on what might be done to improve the variances.
Question 2: For this assignment, compute all required amounts and explain how the computations were performed. Describe whom you would work with to determine the causes of the variances and hypothesize on what caused the variances. Based on your analysis, recommend actions that management could take to improve the variances.