Task 3: learning outcome 3 The table below presents the expected production budget and the actual production volume for one of the office clients during last quarter. This client is facing problems with evaluation the performance of his business and in control budget. You have been asked to help and advice this client in this regard Instructions: 1) Analyse actual, what does it mean? How is actual cost determined? How does this differ to estimated or standard costs? 2) Analyse standard cost, what does it mean? How is standard cost determined? How does estimating standard costs result in variances? 3) Create a flexed budget (standard cost) and apply the variance analysis techniques. 4) Explain and analyse the concept of variance analysis, and why it is important in order to evaluate a business performance and control budgets. 5) Suggest possible course of actions to correct variances 6) Evaluate the advantages and disadvantages of different types of variances. Output Original budget 3,000 units Sales revenue Raw material Actual figures 2,500 units f 130,000 32,000 (40,000 meters) 18,000 (4,500 hours) 56,000 150,000 45,000 (45.000 meters) 27,000 (5,000 hours) 55,000 23,000 Labour Fixed overhead Operating profit 24.000 Actual Costis Standard Costis Define the Variance Analysis & Flexible Budget Variance Analysis: Flexible Budget: Preparing Flexible Budget Preparing Flexible Budget Item Actual Figures Flexible Budget Original Revenues r. d.2 Fixed overhead Profit Definition Calculation Variance Sales Volume Variance Sales Price Variance Material Usage Variance Material Price Variance Labor Efficiency Variance Labor Rate Variance Fixed Spending Variance Budget Reconciliation: Sales Volume Variance Advantages Disac vantages Interpretation Sales Price Variance Advantages Disadvantages Interpretation Material Usage Variance Advantages Disadvantages Interpretation Interpretation Material Price Variance Advantages Disadvantages Interpretation Labor Efficiency Variance Advantages Disadvantages Interpretation Labor Rate Variance Advantages Disai vantages Interpretation Fixed Spending Variance Advantages Disac vantages Interpretation