Jack Childs is nervous about his company’s future performance. The Childs’ family owns 40% of the LLJ Satellites shares and generally controls the company’s direction. Jack is currently the CFO and a...

LLJ’S SATELLITE VARIANCE ANALYSIS
Table of Contents
Memo    3
Introduction    3
Analysis    3
Suggestion for Improvements    5
Schedules for Next Fiscal Year    6
References    9
Memo
Introduction
LLJ’s Satellite company’s 40% share is owned by Jack Childs and helps in controlling the direction of the organization. Further, it is Jack Childs who is presently the Chief Financial Officer and a member of the company’s Board of Director. It is due to poor performance of the company’s operating results for the previous few years, the shareholders along with Jack Childs is becoming anxious. We need to prepare a memo where I will evaluate the way in which the accounting team’s variance analysis was been structured. Secondly, I will also create schedules of the budgets which are applicable for the next fiscal year. It is a budget variance which helps in analysis of the measures which are been conducted periodically and are being used by the governments, corporations, and individuals for quantifying the variances between the budgeted and the actual figures with respect to a specific accounting segment. If the variance is favourable, then it is referred as positive variances and in case the variances is unfavourable, it is a loss or a shortfall and is considered as a negative variance. Hence, there is a variance in the budget of the company which happens due to the errors of the forecasters who are unable to predict the future costs and the revenues correctly or accurately.
Analysis
Usually, the variances in budget arises due to controlled or uncontrolled factors. The controllable factors are the unplanned budgets and labour costs. On the contrary, the uncontrollable costs are external in nature and usually arises due to occurrences outside the organization in the form of natural disasters.
According to the variance analysis in Table.4 it can be observed that the company illustrates a total activity variance amounting to $1752625. There is an unfavourable activity variance with respect to the cost as there are some variable components in the cost and the actual level of activity which is much higher than the budgeted activity level (Palm Beach State, 2021). Further, activity variances result due to differences among the flexible and the static planning of the budget. These unfavourable conditions may occur due to increased orders in the form of more sales. In such situation the production manager cannot be held responsible for an unfavourable variance in the total activity.
From the Table.4 it can be observed that the revenue variance is unfavourable for advanced revenue at -$1800000 while the Basic Revenue is favourable at $2100000. Hence, from this it can be stated that the total revenue is favourable by ($2100000 - $1800000) = $300000. There is a favourable revenue variance since the actual variance exceeds the budgeted revenues of the company (Basu, 2022).
The total plastic variance which is the direct material required to produce LLJ Satellites are favourable at $405000. There is a direct material variance when there is a difference between the standard cost of materials which occurred from the manufacturing activities and the actual costs incurred. Hence, a favourable direct material cost variance occurs when there is savings available with the company and can incur costs which is lower than what is budgeted (Penn State, 2022). This means that the actual costs for manufacturing plastics is less than the anticipated costs of plastics in the budget.
On the contrary, it can be observed that the direct material aluminium variance is unfavourable for LLJ Satellites resulting in a total aluminium variance amounting to -$1936500. This happens when the actual costs are lower compared to the standard costs. From the Table.4 it can be observed that the advanced and basic...