New Look Jacket Inc.
Analysis a Business Issue.
New Look Jacket Inc. (NLJ) specializes in the production of Nylon Jackets and Leather Jackets. The company delivers successful financial records at the end of the 2012 fiscal year with the net income of $417,100, which is $170,850 greater than the net income budgeted for the 2012 fiscal year despite that the company operations goes through some turmoil. A more detail variance shows that the external factor largely responsible for the growth of leather markets that rapidly increase than anticipated making NLJ to catch with the increase in market demand.
Variance Analysis
Contribution Margin
Based on the figure in Exhibit 1, the total amount of contribution margin for the Nylon jackets is $4,350 less than the budget. Although, the actual unit of contribution margin is $0.15 greater than the standard due to the lower admin cost and selling per unit. However, the Leather jackets' total contribution margin is $325,200 higher than the budget. The actual unit for contribution margin is $12.70 less than the standard because of the higher variables in all the business categories.
Sale Variances
Analysis of sale variance reveals that New Look Jackets record 110,000 actual sale volumes greater that sale volume of 100,000 budgeted for the fiscal year. The favorable variance of 10,000 makes the company to record the increase in the sales revenue for the actual budget. The company recorded $5,747,500 as actual revenue compared to $4,075,000 budgeted as sale revenue making the company to record the favorable variance of $1,672,500 in revenue.
Despite the favorable...
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