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DE3J 35 Outcome 3&4

Contents

1.0 Introduction ......................................................................................................... - 2 - 2.0 The flexed budget ............................................................................................... - 2 - 3.0 Calculate the Materials variances, Labour variances and the Total overhead. ... - 2 - 3.1 Direct the materials variances , labour variances and the total overhead. .. - 2 - 3.2 Variance analysis. ........................................................................................ - 3 - 4.0 The recommendations for management (variances). .......................................... - 4 - 5.0 Using four different methods to evaluate the financial. ...................................... - 5 -

5.1 Identify the accounting rate of return........................................................... - 5 - 5.2 Identify the payback. .................................................................................... - 5 - 5.3 Identify the Net present value. ..................................................................... - 5 - 5.4 Identify the Internal rate of return. ............................................................... - 6 - 6.0 Recommendations for investment decision. ....................................................... - 6 - 7.0 Conclusion .......................................................................................................... - 6 - 8.0 Appendices .......................................................................................................... - 7 -

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DE3J 35 Outcome 3&4

1.0 Introduction

This report will divided into two parts. Part A and Part B. In Part A,First of all, I will prepare a flexed budget in line with actual activity. Second, this will including the Materials variances, Labour variances and total overhead. At the same time, I will identify a minimum of one possible cause of the each variance. Finally, according to data analysis, there have been some recommendations to management of Matteck PLC. In Part B, It will have four different ways to evaluate financial performance and give recommendations for Matteck PLC. These ways are ARR ,Payback, NPV and IRR.

Part A

2.0 The flexed budget

For Flex budged of Matteck PLC, we can see the Appendix 1.

3.0 Calculate the Materials variances, Labour variances and the Total overhead.

3.1 Direct the materials variances , labour variances and the total overhead.

This section shows the Appendix 2.

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DE3J 35 Outcome 3&4

3.2 Variance analysis.

Material price variance:

The material price variance is ?32,000(F). According to the data analysis, it is ?2/kg less expensive than planned. The possible reasons can be divided into three points: first, they could replace raw materials, using a lower - grade material. Second, the supplier to provide some discount for this batch of raw materials. Finally, learn from the case, the company has managed to locate new materials from an overseas. Due to the product from overseas, according to different exchange rate, the material will reduce the price. Material usage variance:

The material usage variance is ?30,000(A). The possible reasons include the effects of raw materials and the influence of the machine. If the company using poor quality raw materials, it may be more difficult to work. This will increase the waste materials. At the same time, the case shows that the company's new machinery can be fully used in the second week. The delay time may have caused the machine to use more materials than planned.

Material total variance:

The material total variance is 2,000(F). Case shows that the company's raw materials are from overseas suppliers. This will reduce some costs. Which leads to the material price variance is 32,000 (F). On the other hand, the company has introduced a new machine, the influence of machine installed time, caused some wasted of materials. This makes the material usage variance is ?30000 (A). Even if The company’s material total variance is 2000 (F). The company's management still should pay attention to The utilization of raw materials.

Labour efficiency variance:

The Labour efficiency variance is 10,000(F). The possible reasons could include the new machine to improve staff work efficiency. Using new machine can less labour hours. At the same time , the case shows that the company has had to employ more highly qualified staff. They can increase the

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