What other things should be taken into consideration

Assignment Help Managerial Accounting

Reference no: EM133017288

Question: Ali Yusaf Khan implemented standard costing at the bakery being operated at largest outlets of a giant cash and carry chain of stores in Pakistan. The bakery offers fresh bread, cakes and snacks to shoppers in the store. Although the bakery is not a significant source of revenue for the outlet but it is designed to keep the customers happy and satisfied while they rest during shopping. The menu and offerings at the bakery varies with season and occasions like Eid. The materials for bakery are sourced by the bakery manager and the manager is also responsible for its efficient operations. Staff hiring and remuneration is also decided by the bakery manager. Looking at historical data, engineering studies and after interviews with the bakery staff, standards were developed and implemented in 2018. Variable overheads compose of items like cleaning supplies and are driven by Direct Labor cost. Fixed Overheads include expenses like salary of the manager, depreciation of equipment, decorative material at bakery, notional rent allocated based on area of the bakery and electricity expenses (allocated as well by the store). The following data relates to variance report generated by the system from November 2020 to April 2021. [All numbers below are in thousands of rupees, U denotes Unfavorable and F denotes Favorable variance].

Requried:

Discuss possible reasons for the variances showing up in the report (can they tell a story?)

Which TWO variances should Ali be MOST worried about? Why?

What other things should be taken into consideration while reading this type of report for a business like this bakery?

Reference no: EM133017288

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