Variance Analysis on New Look Jackets
Date: January 3rd, 2013
To: Moderators
From: Candidate
Subject: New Look Jackets Variance Analyses and Draft Operating Budget
Introduction
The following report explains the significance and reasons for the variances in New Look Jacket's 2012 detailed variance report and provides a draft operating budget for 2013.
Analysis of Variances
The sales price variance is zero, meaning the average price New Look Jackets sold products was the same as the budgeted sales price.
The sales mix variance is unfavourable for Nylon Jackets and favourable for Leather Jackets as the demand for leather jackets were unexpectedly high in 2012 and as a result, New Look Jacket sold more leather jackets than budgeted, generating a favourable sales mix variance for leather jackets. New Look Jacket also sold less nylon jackets as a percentage of total jackets sold, resulting in an unfavourable sales mix variance for nylon jackets. The total sales mix variance is favourable indicating the actual sales mix shifted towards the more-profitable leather jackets relative to budgeted sales mix.
The sales quantity variance is favourable for both nylon jackets and leather jackets indicating actual units of all products sold exceeded budgeted units of all products sold.
The market share variance is unfavourable, meaning New Look Jackets performed worse than budgeted compared to its competitors and ended up with a smaller market share than budgeted. The market size variance is favourable, meaning the market as a whole expanded, and there was a higher than budgeted demand for products within the jackets industry.
The direct material price variance is unfavourable for leather jackets meaning New Look Jackets spent more purchasing direct materials to produce leather jackets than budgeted. This was because New Leather Jackets contracted suppliers for direct materials at the beginning of the year, and did not contract enough to satisfy the increased production of leather jackets following the
To: Moderators
From: Candidate
Subject: New Look Jackets Variance Analyses and Draft Operating Budget
Introduction
The following report explains the significance and reasons for the variances in New Look Jacket's 2012 detailed variance report and provides a draft operating budget for 2013.
Analysis of Variances
The sales price variance is zero, meaning the average price New Look Jackets sold products was the same as the budgeted sales price.
The sales mix variance is unfavourable for Nylon Jackets and favourable for Leather Jackets as the demand for leather jackets were unexpectedly high in 2012 and as a result, New Look Jacket sold more leather jackets than budgeted, generating a favourable sales mix variance for leather jackets. New Look Jacket also sold less nylon jackets as a percentage of total jackets sold, resulting in an unfavourable sales mix variance for nylon jackets. The total sales mix variance is favourable indicating the actual sales mix shifted towards the more-profitable leather jackets relative to budgeted sales mix.
The sales quantity variance is favourable for both nylon jackets and leather jackets indicating actual units of all products sold exceeded budgeted units of all products sold.
The market share variance is unfavourable, meaning New Look Jackets performed worse than budgeted compared to its competitors and ended up with a smaller market share than budgeted. The market size variance is favourable, meaning the market as a whole expanded, and there was a higher than budgeted demand for products within the jackets industry.
The direct material price variance is unfavourable for leather jackets meaning New Look Jackets spent more purchasing direct materials to produce leather jackets than budgeted. This was because New Leather Jackets contracted suppliers for direct materials at the beginning of the year, and did not contract enough to satisfy the increased production of leather jackets following the