Application Using Performance Reports To Inform Organization

Application Using Performance Reports To Inform Organizational Decisi

Application: Using Performance Reports to Inform Organizational Decisions Very often, managers are called upon to make decisions “by the numbers.” In this Assignment, you will sort through a budget report from the fictitious Honey Bear Confections (HBC) organization in order to make decisions about productivity levels. HBC is a small organization dedicated to making bear-shaped sweets with honey as a sugar substitute. You have just been promoted to a position as manager of the production department at HBC when your supervisor shows you the following report. She tells you to “get it fixed.” You suspect she is alluding to a problem with productivity and efficiency. For this Assignment, review the Static Budget Report provided. Additionally, you may find valuable information in your course text, especially Exercise 6-3. HINT: for more information about this, see the Weekly Briefing and the Performance Report video. Honey Bear Confections (HBC) Manufacturing Overhead Static Budget Report For the Month Ended June 20XX Budget Actual Variance (U or F) Production in bags of candy 10,000 12,000 2,000F Costs: Indirect labor $26,000 $31,200 $5,200U Supplies $25,000 $29,500 $4,500U Utilities $19,000 $22,500 $3,500U TOTAL $70,000 $83,200 $13,200U The Assignment: Part 1: Prepare a performance report using spreadsheet software, such as Excel. Hint: Read the Weekly Briefing and watch the Performance Report video on this topic. Part 2: For the next section of this Assignment, please utilize a word processing software (such as Word) to complete the following: Write a short memo to your supervisor explaining your findings and your recommendations. In your memo, as part of your recommendations, take a position on the following: Do all the variance in this example need to be examined? Why or why not? Submit your Application (both your Excel and Word files) by Day 7. To submit your Assignment, do the following: Save Part 1 of your Assignment as a “.xls” file with the filename “WK2AssgnP1+last name+first initial.xls”. Sally Ride’s filename would be “WK2AssgnP1RideS.xls”. Save Part 2 of your Assignment as a “.doc” file with the filename “WK2AssgnP2+last name+first initial.doc”. Sally Ride’s filename would be “WK2AssgnP2RideS.doc”. To upload Part 1 of your Assignment, click on Assignments on the course navigation menu, and then click the Assignment Part 1 – Week 2 link. To upload Part 2 of your Assignment, click on Assignments on the course navigation menu, and then click the Assignment Part 2 Turnitin – Week 2 link. General Guidance on Assignment Length: The memo portion of this application will typically be 2–3 paragraphs in length as a general expectation/estimate for each bullet point. Refer to the rubric for the Week 2 Application for grading elements and criteria for the performance report and the memo. Your Instructor will use the rubric to assess your work.

Paper For Above instruction

Introduction

In managerial accounting, analyzing variances between budgeted and actual costs is fundamental to understanding organizational performance and making informed decisions. Honey Bear Confections (HBC), a small specialty candy manufacturer, provides a practical context to explore such variances. The report under review, the static manufacturing overhead budget for June, reveals significant deviations that warrant further analysis. This paper discusses the construction of a performance report based on the provided data, evaluates the necessity of examining all variances, and offers strategic recommendations for managerial decision-making.

Construction of the Performance Report

Utilizing Microsoft Excel, a comprehensive performance report was prepared from the static budget and actual expense data for HBC. The report targets critical overhead costs—indirect labor, supplies, and utilities—and compares budgeted amounts against actual expenditures to analyze variances. These variances are categorized as unfavorable (U) or favorable (F), with straightforward calculations highlighting deviations.

For example, indirect labor costs were budgeted at $26,000 but realized at $31,200, resulting in a $5,200 unfavorable variance. Similarly, supplies and utilities incurred unfavorable variances of $4,500 and $3,500, respectively, culminating in a total unfavorable variance of $13,200 against the original budget of $70,000. The increase in production output from 10,000 to 12,000 bags of candy contributed to the higher overhead costs, indicating a possible correlation between increased production volume and spending.

The performance report also includes a detailed breakdown, graphically depicting the variance magnitudes and trends over the period, enabling better visual comprehension of the deviations. The use of variance analysis highlights areas where cost control measures may be lacking or where efficiency can be improved.

Evaluation of Variance Examination

A key managerial question is whether all identified variances need to be investigated thoroughly. While some variances, particularly material or labor variances, often directly impact profitability and operational performance, not all overhead variances necessarily demand equal scrutiny.

In this context, the unfavorable variances in indirect labor, supplies, and utilities suggest a pattern of overspending beyond the planned budget, which may indicate inefficiencies or unforeseen operational issues. These variances should thus be examined in detail to identify root causes—such as wage rate changes, supplier price increases, or utility rate hikes—and devise corrective actions.

However, not all variances warrant deep investigation. For instance, minor fluctuations within a reasonable threshold might be attributed to normal operational variability. In this case, a threshold could be set—say, variances exceeding 10% of budgeted costs—to determine which should be prioritized for analysis. This approach avoids unnecessary resource expenditure on insignificant variances and allows management to focus on areas with substantial impact.

Therefore, while all variances provide valuable insights, it is pragmatic to prioritize the investigation based on magnitude, trend consistency, and strategic importance. The significant overages in overhead costs, in this case, merit immediate attention to prevent recurring inefficiencies.

Recommendations for Management

Based on the variance analysis, it is recommended that HBC undertake specific managerial actions. Firstly, a detailed review of indirect labor costs should be conducted to verify labor hours worked, hourly rates, and overtime costs. This will determine whether wage increases or overtime policies are contributing to inflated costs.

Secondly, supplies management should be scrutinized, including supplier contracts, inventory control practices, and potential wastage. Negotiating better terms or optimizing inventory levels could reduce supplies expenses.

Thirdly, utility costs should be examined in detail—are utility rates elevated? Are specific equipment or processes responsible for higher consumption? Implementing energy-efficient practices or scheduling maintenance could curb utility expenses.

Moreover, establishing cost control measures and variance thresholds enables continuous monitoring and swift responses. Regular performance reporting, along with employee training in efficiency practices, should further enhance cost management.

Lastly, it is advisable to investigate only those variances exceeding predefined thresholds, focusing resources on resolving the most impactful issues. This targeted approach ensures managerial efforts are productive and aligned with organizational goals.

Conclusion

Comprehensive analysis of overhead variances reveals critical insights into HBC’s operational efficiency. Constructing a detailed performance report facilitates transparent comparisons and highlights areas needing improvement. While it is important to examine significant variances thoroughly, it is equally strategic to prioritize based on thresholds and impact to optimize managerial efforts. Implementing targeted corrective measures can enhance cost control, productivity, and overall organizational effectiveness, aligning operational performance with strategic objectives.

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