Nomad Company manufactures two types of tablets, 7 and 13 versions. It operates in a very...

 

 

Transcribed Image Text:

Nomad Company manufactures two types of tablets, 7" and 13" versions. It operates in a very competitive market and is always having to review its selling prices to remain ahead of the market. The company operates a standard costing system and relies heavily on variance analysis assessments of its products monthly. The management report for the month of August is as follows: Note Total number of units made and sold 4,600 1 Material price variance 13,800 F 2 Notes: (1) The budgeted total sales volume for the tablets was 5,000 units consisting of 3,000 units of the 7" version and 2,000 units of the 13" version. Actual sales volume was 2,800 units of the 7" version and 1,800 units of the 13" version. Standard sales prices are $450 and for the 7" version and $800 for the 13" version. The actual selling prices were $390 and $920 respectively. The standard contributions for the 7" and the 13" are $120 and $270 respectively. (2) The only reason for this variance as a decrease in the material component, B. Each 7" tablet and 13" tablet made requires one unit of component B, for which the standard cost is $75 per unit. A more advanced version of component B entered the market in the month of July, and this caused a reduction in the cost of Nomad's component in the marketplace. The market price for component B, fell to $70. Nomad Company actually paid $72 for the component. Required: (a) Calculate the following for the month of August, showing all workings clearly: i. The sales volume contribution variance, the sales mix variance, and the sales quantity (11 variance. marks) ii. The material price planning variance and material price operational variance. (9 marks) (b) Explain the reasons why Nomad Co would be interested in the material price planning variance and the material price operational variance. (5 marks) Nomad Company manufactures two types of tablets, 7" and 13" versions. It operates in a very competitive market and is always having to review its selling prices to remain ahead of the market. The company operates a standard costing system and relies heavily on variance analysis assessments of its products monthly. The management report for the month of August is as follows: Note Total number of units made and sold 4,600 1 Material price variance 13,800 F 2 Notes: (1) The budgeted total sales volume for the tablets was 5,000 units consisting of 3,000 units of the 7" version and 2,000 units of the 13" version. Actual sales volume was 2,800 units of the 7" version and 1,800 units of the 13" version. Standard sales prices are $450 and for the 7" version and $800 for the 13" version. The actual selling prices were $390 and $920 respectively. The standard contributions for the 7" and the 13" are $120 and $270 respectively. (2) The only reason for this variance as a decrease in the material component, B. Each 7" tablet and 13" tablet made requires one unit of component B, for which the standard cost is $75 per unit. A more advanced version of component B entered the market in the month of July, and this caused a reduction in the cost of Nomad's component in the marketplace. The market price for component B, fell to $70. Nomad Company actually paid $72 for the component. Required: (a) Calculate the following for the month of August, showing all workings clearly: i. The sales volume contribution variance, the sales mix variance, and the sales quantity (11 variance. marks) ii. The material price planning variance and material price operational variance. (9 marks) (b) Explain the reasons why Nomad Co would be interested in the material price planning variance and the material price operational variance. (5 marks)