Production Cost Variance Analyses Essay Example

Production Cost Variance Analyses Essay Typically, one number represents what actually happened, that is, measured performance. The other number is a performance standard, such as a standard cost, a budget, or historical performance (what happened in the past, such as last month or last year). A variance analysis involves the decomposition of the variance into the individual factors that caused the variance. There is no one way to do variance analyses; many types of variance analyses can be appropriate in certain situations. Some involve comparisons of actual and expected results for individual line items in the accounting records. For example, managers might be interested to know that actual expenses were greater than gutted expenses because travel expenses were higher than expected, or that sales were lower than expected because one large customer did not order its normal quantity of goods. Other variance analyses involve the simultaneous investigation of the effects of prices, volumes, production or sales mixes, and exchange rates. Managers perform these variance analyses because they provide important insights about problems (or opportunities) that might exist. This chapter describes techniques for analyzing production cost variances in a way that provides managers with useful insights in controlling the various organizational elements that affect the performance of the production function. Most manufacturing companies use the standard sets of production variance analyses that are described in this chapter. Chapter 21 discusses variance analyses for other income v. TTS s, Ii-r statement elements. 622 Part 2 Management Accounting Direct Material and Labor Variances TX Direct Material be. The standard direct material cost of one unit of product (I. E. , one unit of stout) is found by multiplying the quantity of material (input) that should be needed for producing one unit of put times the price that should be paid per unit of material input (e. G. , 9 pounds per remit of output at $4 per A standard cost represen ts what the cost should $36 per unit of output). We will write a custom essay sample on Production Cost Variance Analyses specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Production Cost Variance Analyses specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Production Cost Variance Analyses specifically for you FOR ONLY $16.38 $13.9/page Hire Writer T}nor total standard direct material cost for an accounting period is the standard material cost per unit of output multiplied by the number of units produced in that period (e. 9. , if 100 units are produced, the total standard material cost is $3,600). This total standard material cost ($3,600) also can be calculated by multiplying the total standard quantity of material (900 pounds) by the standard cost per unit of material $4 per pound). The total standard quantity of 900 pounds is 100 units produced times 9 pounds per unit. Similarly, the actual direct material cost of one unit of stout is the actual quantity of material input used in producing that unit times the canal price paid per unit of material. The total actual direct material cost for a period is the sum of these actual costs for all the units produced in the period The differ,once between the total standard material cost and the total actual material cost of the goods actually prà ©cised direct material cost variance. That means that dirt mated variances are based on the actual putout quantity of a period; planned or budgeted output less play no part in the Ana$Russ. Because both the standard and accrual material cost totals were computed by multiplying a physical input quantity (e. G. , if pounds) by a price per unit of input (e. G- $4 per pound), it is possible decomposability material costarring into aquantitycomponentandaprice component,NT Specifically, these component,ants are as felons: pound 1 . The fact that the actual quantity of material used for the stout produced offered from the standard quantity causes the material usage finance (also called the yield variance or simply the quantity variance). . Theft TNT the curia price of each unit of material input tittered from the standardize causes the materialistic variance The algebraic sum of these two variances is the total marital variance{hat is, the difference between total actual direct material costs for the period and total standard direct mated costs. Fifth companys standard cost eastern includes only one account -f for material variance, is sum is the mammoth that would appease in that count. Favorable and Unfavorable Wariness If actual cost is Lorene than standard cost, the variance is said to ; if the reverse, the variance? is said table unfavorable. As explained in Chapter 19, favorable variances layer as credits in variance accords whereas irremovable variances appear as debits. We shall use fees adjectives in the description that follows. Hewer, it should be recognized deferrable in this sense does not necessarily mean that performance was good; it means only that actual costs were laurel +Han standard costs. The As pointed out in Chapter 19, some compartmentalized cost $items have two material variance accounts. Such slotted identify material price variance when the. Inertial is received into materials inventory. When this is done, the material price variance is baaed on the quantity of materials received doing the period rather than the quantity that was USDA during the period. In these systems the material usage variance is developed when materials are sued to production, as shown in Illustration 19-2. 0 Unction Astringencys$sees 623 interpretation of these variances, once they have been identified, is discussed eater. Lower costs can even indicate a problem because they might be the result, for example, of using inferior quality materials. Formulas The commonly used rules for finding the two direct material variances are as follows: 1 . The material usage Viviane is the difference between total standard quantity and total actual quantity femoral input, with each total quantity partici pated standard price per unit of material. Both total quantities are based on the number of units of output actually produced. 2. The malarial price variance is the difference between the standard price ND the actual price per unit of material input, multiplied by the actual quantity of material used- Using the symbol A (delta) to stand for the difference between an actual amount and a standard amount, these rules can be stated as : A Quantity * Standard price price variance : A price * Actual quantity Usage variance Example Each unit of Product X is supposed to require 9 pounds of direct material costing $4 per pound.

Chocolate and Confectionery Industry Pakistan

Chocolate and Confectionery Industry Pakistan Free Online Research Papers Confectionery and Chocolate industry of Pakistan in 2009 is an analysis of branded (domestically produced) confectionery and chocolate market of Pakistan. The article reveals close estimates of sales turn over of major active players in the industry. It also examines contemporary trends in the local confectionery and chocolate market, with an emphasis on providing some useful information about the structure, norms, challenges and competitive landscape of the industry. Before proceeding to our core topic, it would not be unwise to have a look at the snapshot of country’s socio-economic indicators. Pakistan- Snapshot: The Islamic Republic of Pakistan is a medium size, densely populated country with over 170 million people living in 796,095 square kilometres. With respect to population and area, Pakistan stands at no. 7 and no.43 respectively among the nations of the world. It is located at Southern Asia, bordering the Arabian Sea, between India on the east and Iran and Afghanistan on the west and China in the north. Pakistan, an impoverished and underdeveloped country, has suffered from decades of internal political disputes, low levels of foreign investment, and declining exports of manufactures. Faced with untenable budgetary deficits, high inflation, and haemorrhaging foreign exchange reserves. During 2004-07 GDP growth has been within the range of 6-8%. Inflation remains the top concern among the public, jumping from 7.7% in 2007 to 20.8% in 2008, primarily because of rising world fuel and commodity prices. In addition, the Pakistani rupee has depreciated significantly as a result of political and economic instability. Confectionery and Chocolate Industry – An overview: Despite Pakistan’s confectionery and chocolate industry has enjoyed an emerging and growing trend in the recent past yet its size and growth pattern has been far inconsequential compared to other countries of Asia-pacific region. The industry has grown with an average annual rate of 6.5 to 7.5 % during 2002-2008. Domestic brands dominate the market accounting for more than 85% of total value sales of the industry. The industry as a whole can be divided between two broader sectors namely organized sector (branded segment) and un-organized sectors (generic segment). The branded segment is more of monopolistic in nature where there are nine prominent, active players in the competitive landscape of this sector. However 80% of the industry’s share is being enjoyed by the five companies listed below. A brief overview of major companies’ estimated annual sales in PKR (1 US$= 83 PKR) is as follows: Company name, Major Product lines, Major brands Estimated annual turn-over PKR.(1US$=83PKR), Share % Hilal Candy, Bubble, Jellies, Chocolates, Beans, powder Drinks, Supari Ding Dong Bubble, Fresh up bubble, Tulsi, AamRus, Kopra candy Limopani 3.5 billion 26% Share Ismail Industries Ltd.(Candyland) Jellies, candies, lollypops, Chocolates, Biscuits, Snacks etc. Chillimili, Fanty candy, Now, Bisconi Chocolito, Cocomo, Snack city, Sonnet 2.8 billion 21% Share B.P sweets Jellies, candies, lollypops, Chocolates, Biscuits, Bread, Snacks etc. Spacer, Dolphin Jellies, B.P Lollies, Dream Chocolates etc. 1.7 billion 13% Share Cadbury’s Chocolates(Countlines and Moulded) Toffees, Chewable mint candies Dairy Milk Chocolate, Éclairs, Softmint, Velvet 1.5 billion 11% Share Kidco Bubbles candies, lollypops, Chocolates etc. 4ever, Centro-bubble, Lollies, Punch candy, Chox 1.20 billion 9% Share Mayfair Candies, Toffees, Creamers, Amrood candy, Éclair, Cafe biscuit 0.8 billion 6% Share Mitchell’s(only Confectionery Chocolates) Groceries ( Squashes, Jams, sauces, Chocolates- Moulded and Countlines , Toffees and candies Milk Toffee, Fruit BonBon, Butter Scotch, Jubilee, Golden Hearts 0.70 billion 5% Share DanPak Bubble Gum, Lolly Pops, Candies Chini mini, Fresh’ O bubble, Choco Bisco, Milko Sip 0.70 billion 5% Share Sweet Hills Candies, Toffees Dr. Milk, NutKut, Love candy , Cow 0.50 billion 4% Share TOTAL 13.4 Billion PKR Confectionery and Chocolate Market – An overview Characteristics: The branded confectionery and chocolate market is highly price elastic and growing with the bulk of sales concentrated in mid-price range products. Urban markets account for the major share and also for a higher penetration rate. Various retail price points exist within the mass market segment of chocolates between the range of PKR 3-25. In Sugar Confectionery major running confectionery items fall into the retail price segment of Rs. 0.50-1.00. The efforts made for the induction of Rs.2 Confectionery unit by industry giants have gone into vain so far. However Rs. 2 and 3 are popular price points for lolly pops and chocolates range. The industry has faced â€Å"coin-barrier† issue in sugar confectionery products at least three times during last three decades when all key players unanimously agreed to increase their products’ price due to escalating prices of raw materials (first from 25 paisa to 50 paisa- in mid 80’s, than 50 paisa to Rs. 1 – in mid 90â₠¬â„¢s and lastly from Rs.1 to Rs.2-in late 2008) whereby the active players of the industry were compelled to raise their prices not less than any thing but 100% because next jump to coin / price denomination was such that they had no way out. It would be interesting for the readers to learn that such moves however have always been proved to be a â€Å"bitter pill† for the industry as it brought immense resistance from consumers and trade. In some of the cases decline in sales as a reaction of price increase was so huge that it forced to leading brands to take their decision back yet they were not able to retrieve their original volumes again. Mitchell’s Milk Toffees and Kidco 4ever are classic examples. To avoid and defer this situation (up to last extend) pro-active companies in Pakistani confectionery industry adopt three kinds of strategies , without reducing or with slightly reducing trade margins. Namely reduce the no. of units per pack, unit size, and packaging ( in an endeavour to reduce cost) Compromising in product quality by reducing qty and/or quality of expensive raw material by using close substitute that is available relatively at cheaper price as a replacement of expensive raw materials. Distribution and Selling strategy: About (70-80) % sugar confectionery and chocolate sales generate through wholesale channel depending upon the nature of product and strategies of manufacturing companies. Almost all but precisely Hilal and B.P rely much on wholesale channel to generate bulk chunk of their total sales. To support their sales through this channel they advertise heavily on electronic media to create brand pull for their brands and subsequently it force retailers to buy these brands from whole sale. The underlying reason behind limited coverage in retail sector by these two companies is they do not have premium priced items that could yield sufficient revenues to make retail distribution viable for their distribution partners so they do a limited coverage in retail sector. Since these companies themselves do not emphasize on retail penetration so their distributors also take an escape route and adopt the way of easy selling through WS. However there are companies like C adbury, Candyland, Mitchell’s and Mayfair that are fully aware of the importance of retail penetration .Hence these companies pay due importance and attention to retail coverage and subsequently allocate resources for retail sector. As stated earlier the emphasis of Hilal and B.P has always been on building consumer pull through mass media advertising ( mostly through television) and pushing their brands through wide-spread network of distributors and wholesalers throughout the nation . This combination of â€Å"Push Pull â€Å" has proved to be a successful tool in their cases because the nature of their brands also support this strategy as they produce products of mass market with as low price as Rs.1 , 2 and beyond. Because of this pricing strategy their products are equally popular in rural and urban towns among middle and lower middle class. B.P and Hilal having this advantage enjoy the benefits of a wide-spread distribution network in 300+ towns and over 350 distri butors nation wide (as they have more than one distributors in some towns). They always try to adopt cost leadership strategy and generate revenues through high volumes of sales. Frequent launches, re-launches, re-introduction of old brands with slight modifications, withdrawals, adjustments in packaging, product designing and even recipe change are a common phenomenon in the brands of these two major companies. Contrary to this Cadbury’s , Candyland and Mitchell’s believe on establishing brands and brand equity and therefore protraction of quality up to last possible extend remains their top priority. Popular Brands , Price point and Trades’ margins: Popular Brands: In hard-boiled (candy) category: Price range 0.50 paisa-Re.1: Fanty (Candyland), AamRus (Hilal), Choran Chatni (Hilal), Kopra candy (Hilal), 4ever (Kidco), Butter Scotch (Candyland) and (Mitchell’s), Amrood (Mayfair), Creamers (Mayfair) and Fruit Bonbons (Mitchell’s) are famous brands. In soft-boiled (Toffees) category: Price range 0.50 paisa-Re.1: Spacer (B.P) – a brand of 450- 500 million PKR, Milk Toffee (Mitchell’s)- brand worth over 250 million PKR and Éclairs (Cadbury’s) can be ranked top three among others in this category. As of today (August 2010) there hardly exist any 50 paisa confectionery unit, those that were available, have been switched to Rs.1 price point. In Lolly Pops: Price range Re.2- Rs.3/- : twin-lolly (B.P), Paint n Pop (B.P), Kidco Pop (Kidco), Funny Bunny (Candyland) are popular among consumers. In Enrobed Chocolate category: Price range Re.1- Rs.5/- : Jubilee (Mitchell’s), 5 Star ( Cadbury) Perk (Cadbury’s), Now (Candyland), Dream (B.P), Choco Dip (B.P), Kat Kat (B.P) Unitee (Mitchell’s), Sonnet (Candyland), Luxuree (Mitchell’s), Chox (Kidco) and Paradise (Candyland) enjoy major share in the market. In Moulded Chocolate category: Price range Re.2- Rs.10/- :Dairy Milk (Cadbury’s), Cone (B.P), Mr. Bear (B.P) Twin Rabbit (B.P), Golden Hearts ( Mitchell’s), Velvet (Cadbury’s) are famous among other brands. In Bubble: Rs.1: Ding Dong (Hilal) in Rs. 1 and recently launched in Rs. 2 as well. The brand has worth about 1000 million PKR, Fresh Up (Hilal) – retail Rs.5/-, Tiger (Mayfair) and Kidco Bubble, Centro (Kidco) are leading brands. Though retailer’s margin varies from companies to companies and product to product but generally acceptable margin in local items for retail trade is between 15-25%. It is lower for fast-moving brands and higher in the case of slow-moving items. Drivers, Challenges and Key Trends: Drivers: Until mid 80’s chocolates was supposed to be the product of upper and upper middle class segment. In 1983 Mitchell’s Jubilee was launched first time in Pakistani market at Rs.3.50 per bar. Due to its attractive packaging, quality, affordable price and an intact media support the brand received un-matched reception and became a success story in Pakistani industry. The brand is still very popular among masses and available in three different price points at Rs.2, Rs.5 and Rs.10. In early 2000 Cadbury’s introduced quality products with affordable price. The launch of Dairy Milk (Rs.5/-), 5 Star (Rs.5/-), Velvet (Rs.5/-) and Perk (Rs.3) with attractive dispensing-chillers was the turning and revolutionary point for making chocolates the choice for every one. The role of Cadbury’s for expansion of chocolate market in Pakistan will always be written in golden words. Challenges: The most common challenges to this industry are soaring prices of raw material, high excise and import duties on raw material, high entry barrier because of strong monopolistic competition and influx of cheap imported brand through gray-Channels. Trends: Driven by marketing initiatives, consumer preferences are speedily changing in the favour of chocolates. Independent retailers and wholesalers are still the largest channel contributors however the role of International modern trade (Makro, Metro and HyperStar) is growing at the increasing rate. Foreign or imported brands are successfully targeting the Lucrative premium segments in urban population. Nestle has recently revamp their sales and distribution management system through appointment of one of the leading distribution house in Pakistan. Large retailers and wholesalers have already started private imports by paying less import duties through tax evasions. The largest bakery and confectionery chain of Lahore is also considering for launching their own chocolate brands in a bid to grow their private label sales. Keeping these positive signs in mind one could expect that future of Chocolate and Confectionery market of Pakistan is promising. 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Patch Essay Example | Topics and Well Written Essays - 500 words

Patch - Essay Example pete their products and prices, which relatively benefit consumers in the way that they will be able to find everything online with lowest price as they mention in their mission. Excluding all other matters, the huge number of customers proves it all about Amazon’s excellent prices and products. Currently, people not only see Amazon as a platform for e-commerce, but also as a famous company for its own products. Amazon recently released many products such as Kindle Fire, TV Fire, and Fire Phones, which took the sale of e-books, e-music and e-movies to another level. It has contributed many benefits to the content creators and consumers. Content creators are happy when they are able to directly publish their products through Amazon with lower cost, while consumers are satisfied with the huge number of e-books with cheaper prices compared to physical ones. Fulfillment by Amazon (FBA) is quite an outstanding service. Amazon claims to help third-party sellers â€Å"to pick, pack, ship and provide customer services.† Consequently, such sellers only need to provide their products. With FBA program, Amazon uses robots to reduce the need of workers, and boost the efficiency of selling. However, while focusing on new technology Amazon fail on providing safe work environment to its employees who are their important stakeholders. The current U.S Supreme Court about Amazon warehouse working condition clearly illuminates this weakness. According to Bloomberg Reports, there have been more than dozen cases filed against Amazon since 2010. Although, the company can manage to get high profit, they still have some problem in communicating with the employees. After doing some research and analyzing the business, it became apparent that Amazon is doing well by successfully putting people together in a joint performance to achieve a common goal. However, we still maintain that the company also has some downsides. Its excellent prices and services are not the only measurement to