Analysis of Financial Loss in Month of October

To: Mr. Santiago

From: M

Date: August 3, 2010

Subject: analysis of financial loss in month of October

I am sending you this memo because of your recent inquiry into our financial loss in the month of October; I have gone over the figures of our actual expenses for the month and our budgeted expenses for the month, and have come up with some interesting numbers.

Based on our actual cost expenses I was able to figure out our total spending for each of our 3 variable costs for the month. I further took these numbers and divide them out so that we could see what the factory is spending on a per unit basis. Once I was able to obtain a per unit cost basis I was also able to see where our per unit rates for the month differed form the budgeted standard rate for each unit produced.

From theses calculation I was able to see that although we spent less money on our direct materials than we had originally budgeted on a per pound basis $2.30 opposed to a budged rate of $2.40 per pound. We did however use more materials per unit than was budgeted we usesed 4.76 pounds per unit vs. the 4 pound per unit budgeted, the need for more materials led to $ 6,740.00 worth of spending over the original budget or a difference of $1.35 per unit.

I found that materials were not the only place that we spent more money than what was budgeted in the month of October we also had budget over runs in our direct labor costs. Yet again despite a lower cost of labor we were still unable to meet our budgeted cost for our direct labor hours we had an actual cost of $ 8.90 per hour vs. a budgeted cost of $ 9.00 per hour. Despite this favorable cost reduction we spent $ 10,380.00 more than we had budgeted on labor for the month this works out to about $ 2.08 worth of added cost on per unit basis. This added expense comes from