Core 2 - Week 6 - IP Solution ACCOUNTING CPA

Core 2 — Week 6 Integrated Problem Solution The following solution is a “best” response, demonstrating a level much higher than competent. However, there may be additional acceptable and reasonable points that are not reflected in this response. In addition, candidates are not expected to prepare a response of this level given the time constraints involved and, if applicable, page limits provided. Memo To: Adam Burke From: CPA Subject: Requested analysis for Burke Entertainment Ltd. (BEL) BEL has seen rapid growth for its new toy, the B.R.B. doll, and requested that some analysis be performed on its financial information, as well as advice on the potential equipment purchase and related financing. I have included this analysis and advice below. Assessment Opportunity #1 The candidate analyzes the rate and efficiency variances for direct material and direct labour and explains the results. The candidate demonstrates competence in Management Accounting. CPA Map Competencies: 3.2.3 Computes, analyzes, or assesses implications of variances decisions (Core – Level A) See Exhibit I for my analysis of the production variances. As you can see, there is a favourable flexible budget variance of $45,000 for the direct material (polymer). There is a favourable rate variance of $89,000. This tells us that the amount paid for the material was less than what you had budgeted. This makes sense, given that Adam switched to a lower-cost polymer.