CVp/Budgeting/Variances

 

RYT Candy Company sells lollipops.

 

Last year the company sold 10,000,000 lollipops for $1,000,000.

 

The Variable Costs were $350,000 and the Net Profits were $100,000

 

Administration has directed management to double profits in the next year.

 

 

 

Part 1:  Determine the Number of lollipops that must be sold to reach this target.

 

 

 

Part 2:  Determine the DL and DM budget needed to reach this target.

 

           

 

            DM:     Cost $1 per pound

 

                        Each unit requires 1/50 of a pound

 

 

 

            DL:      Labor costs are $10 per hour

 

                        Each unit requires .0015 labor hours

 

 

 

 

 

Part 3:  Determine the DL and DM variances and provide explanations to the Board of Directors.

 

           

 

            DM:     Cost $1.50 per pound ,  220,000 pounds used

 

            DL:      Cost $12 per hour,   16000 labor hours used