SportME, a bycicle company, sells 2 product :

- The first one is "Byciclo" sold at 275€ each. It requires 2h of work, 10Kg of steel and 1,5kg of Carbon
- The second one is "Flash", sold at 730€ it requires 5h of work, 8kg of steel and 6kg of carbon

To prepare for the next month the company want to keep 900 byciclo and 60 flash in its inventory. They also want to keep 50k
The labour wage is 11€
The opening inventory of the month is the following :
Byciclo 1,300
Flash 30
Steel 50
Carbon 4.5
1) Establish all the budgets of the company
2) Actual results are available on the right : compute the variances
SALES BUDGET Forecasted sales Selling price
Byciclo 12,000 275
Flash 4500 730
Total

PRODUCTION BUDGET Byciclo Flash

Units to be sold 12000 4500
+ Planned closing stock 900 60
=Total units required for sales and stocks 12900 4560
- Planned opening stock 1300 30
= units to be produced 11600 4530

MATERIALS USAGE BUDGET Byciclo Flash

Steel (in kg) 10 8
Total (in kg) 116000 36240
Carbon (in kg) 1.5 6
Total (in kg) 17400 27180
Direct labour 2 5

MATERIALS PURCHASE BUDGET Steel Carbon

Quantity necessary to meet requirements 152240 44580
+ Planned closing stock 50 8
- Planned opening stock 50 4.5
= Total units to be purchased 152240 44583.5
X Standard cost (planned unit purchase price) 4 60
= Budgeted cost (purchase budget in value) 608960 2675010

LABOUR BUDGET Byciclo Flash

Production volume (units) 11,600 4530
x Standard labour hours 2 5
= Total number of hours 23200 22650
x Standard labour rate 11 11
= Total cost (Labour budget in value) 255200 249150

PRODUCTION OVERHEAD BUDGET Byciclo Flash

Standard variable overhead rates
Indirect materials 1.1 0.45
Indirect labour 0.9 0.9
Power (variable portion) 0.3 0.15
Maintenance (variable portion) 0.2 0.25
TOTAL VARIABLE OVERHEADS
Budgeted fixed overheads
Depreciation 120,000 180,000
Supervision 30,000 11,000
Power (fiwed portion 25,000 40,000
Maintenance (fixxed portion) 10,000 15,000
TOTAL FIXED OVERHEADS 185,000 246,000

Estimated non-manufacturing overheads €

Stationary (Administration) 3,000
Salaries
Sales 41,000
Office 28,000
Commissions 12,000
Car expenses (sales) 3,000
Advertising 40,000
Miscellaneous 4,000
TOTAL ADM. & SELL. OVERHEADS 131,000
lls 2 product :
of work, 10Kg of steel and 1,5kg of Carbon
f work, 8kg of steel and 6kg of carbon

clo and 60 flash in its inventory. They also want to keep 50kg of steel and 8kg of carbon

We will now focus only on Flash

Actual results
Units sold 5,300
Revenues 3,720,600
Total revenue Manufacturing variable costs 2,128,324
3300000 Contribution margin 1,592,276
3285000 Manufacturing fixed costs 431,000
6585000 Selling overhead 102,000
Administrative overhead 50,250
Operating profit 1,009,026

Flexible budget
Per unit
Revenues 730
Steel 32
Carbon 360
Labour 55
Overheads
Total Indirect materials 2.25
Indirect labour 4.5
152240 Power (var portion) 0.75
Maintenance (var portion) 1.25
44580 Total variable cost 455.75

Contribution margin
Manufacturing fixed costs
Selling overheads
Administrative overheads
Operating profit

Actual results
Units sold 5,300
Revenues 3,869,000
Manufacturing variable costs 2,415,475
Contribution margin 1,453,525
TOTAL Manufacturing fixed costs 431,000
 Selling overhead 96,000
Administrative overhead 35,000
45850 Operating profit 891,525

504350

BUDGETED BYCICLO BUDGETED FLASH

25520 10192.5
20880 20385
6960 3397.5
4640 5662.5
58000 39637.5

50% directly

Estimated selling overhead €

Salaries sales 41000
Commissions 12000
Car expenses (sales) 3000
Advertising 40000
TOTAL SELLING OVERHEADS 96000

Estimated selling overhead €

Stationary 3000
Salaries office 28000
Miscellaneous 4000
TOTAL ADMINISTRATIVE OVERHEADS 35000
e will now focus only on Flash and the variances we faced

Static budget Static budget variances

4500 800 F
3285000 435,600 F
2,064,548 63,777 U
1,220,453 371,824 F
431,000 0
96000 6,000 U
35000 15,250 U
658,453 350,574 F

We still focus on Flash. We bought our steel at 4,2€/Kg and our carbon
Volume Total Steel Carbon
5,300 3869000 Price variance 8480
169600
1908000
291500

11925
23850
3975
6625
2415475

1453525
431,000
96000
35000
891,525

Static budget Sales-volume variance

4500 800 F
3285000 584,000 F
2,064,548 350,928 U
1,220,453 233,073 U
431,000 0
 96000 0
35000 0
658,453 233,073 F
our steel at 4,2€/Kg and our carbon at 57,37€/Kg. Compute the price variance and the efficiency variance for this 2 elements
or this 2 elements