Description
Submit a paper which is 2-3 pages in length (no more than 3-pages), exclusive of the reference page. Paper should be double spaced in Times New Roman (or its equivalent) font which is no greater than 12 points in size. The paper should cite at least two sources in APA format. One source can be your textbook.
Please describe the circumstances of the following case study and recommend a course of action. Explain your approach to the problem, perform relevant per unit calculations and analysis, and formulate a recommendation. Ensure your work and recommendation are thoroughly supported.
Case Study:
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:
| Budget | |
|---|---|
| Cost 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
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.
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.
Superior papers will:
- Perform all per unit calculations correctly.
- Articulate how the calculations were performed.
- Assess the variances computed and evaluate the operational results (i.e., is performance better or worse than budgeted?).
- Explain with whom you would work to identify the root causes of the variances.
- Propose well-thought-out causes for each variance.
- Conclude on which variances require management’s attention and recommend courses of action.
Be sure to use APA formatting in your paper. Purdue University’s Online Writing LAB (OWL) is a free website that provides excellent information and resources for understanding and using the APA format and style. The OWL website can be accessed here: http://owl.english.purdue.edu/owl/resource/560/01/
This assignment will be assessed using the BUS 5110 Unit 5 Written Assignment rubric
Explanation & Answer
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Running Head: PAPAYA PARTNERS CASE STUDY
Papaya Partners Case Study
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PAPAYA PARTNERS CASE STUDY
In explaining the variance, we calculate one by one.
We start with the Standard Cost which is got from the budgeted cost of production for one
unit of product.
Overall Standard Cost is obtained from the following
fruit will be
200,000/20,000 = 10/carton
packaging will be 10,000/20,000 = 0.5/carton
labor will be
Standard Cost
90,000/20,000 = 4.5
= 15/carton (10+0.5+4.5)
Further, Calculating the actual cost per unit which is calculated by obtaining all the actual
costs that are incurred in producing one unit of carton gives the following:
Fruit:
Packaging:
244,200/20,000 = 12.21/Carton
11,000/20,000 = 0.55/carton
Labor: 150,000/20,000
= 7.5/carton
Actual cost per carton
= 20.26/carton
Moving on to the direct materials price variance, it can be obtained from the difference
between the actual amount used or spend and the standard cost of the mate...
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