Question

2. ABC Pty Ltd operates a no frills hairdressing salon with a single service offering wash, cut and blow dry (WCD). The price of this service is $40. The budget for September is shown below. Actual figures for September were: sales revenue of $30,400 for 760 units; supplies $2,000, variable utilities $1,520, labour costs $16,000; and fixed overhead $9,000 Sales (WCDs) 800 Sales Revenue $32,000 Supplies $1,600 Labour $16,000 Variable utilities $1,600 Fixed overheads $9.000 Profit/(loss) $3,800 Required: (a) prepare a variance analysis for September. The analysis should show the original budget, a flexed budget, actuals and relevant variances. (5 marks) (b) To assist the Managing Director of ABC Pty Ltd in controlling the business, briefly interpret and provide possible explanations for the variances. This part will be a maximum of 200 words. (5 marks)

Answer 1

a) The following is the flux or fluctation analysis  

	Budgeted	Actuals	Variances (Actuals- Budegted)	Flux Analysis (Percentage Change Variances/Budgeted)
Sales	800	760	-40	-5%
Sales Revenue	$                                   32,000	$           30,400	-1600	-5%
Supplies	$                                     1,600	$             2,000	400	25%
Labour	$                                   16,000	$           16,000	0	0%
Variable Utilities	$                                     1,600	$             1,520	-80	-5%
Fixed Overheads	$                                     9,000	$             9,000	0	0%
Profit/Loss	$                                     3,800	$             1,880	-1920	-51%

ABC PTY Ltd - WCD Flux Analysis for September Budgeted Actuals Variances Flux Analysis Sales 800 760 -40 -5% Sales Revenue $ 32,000 $ 30,400 -1600 -5% Supplies $ 1,600 $ 2,000 400 25% Labour $ 16,000 $ 16,000 0 0% Variable Utilities $ 1,600$ 1,520 -80 -5% Fixed Overheads $ 9,000 $ 9,000 0 0% Profit/Loss $ 3,800 $ 1,880 -1920 -51%

With Formula -:

Sales Sales Revenue Supplies Labour Variable Utilities Fixed Overheads Profit/Loss Budgeted 800 32000 1600 16000 ABC PTY Ltd - WCD Flux Analysis for September Actuals 760 30400 2000 16000 1520 9000 =E20-(SUM(E21:E24)) Variances =E19-D19 =E20-D20 =E21-D21 =E22-D22 =E23-D23 =E24-D24 =E25-D25 Flux Analysis =F19/D19 =F20/D20 =F21/D21 I=F22/D22 =F23/D23 =F24/D24 =F25/D25 1600 9000 =D20-(SUM(D21:024))

b) The varation between the actual and budgeted profits have majorly come from one are which is supply cost.There has been a 25% increase in the cost of supplies over the budgeted price. We need to find out what has caused the increase in supply cost. There might have been some untoward external shift in the business environment and the COVID-19 Pandemic might have caused it.
However the supply costs and vendor charges needs to be investigated for the coming months.

Note to student: In the absence of any other useful information. Part B has to be this short. if you find any other information please add to it :). Also would like a thumbs up if you like the answer