The purpose of this memorandum is to present our findings after performing a variance analysis for the year of 2017. We will highlight variances in detail and provide suggested actions for the future.
Concerning revenue, our company was over budget. This result could be attributed to the unfavorable variances that occurred.
Beginning with our unfavorable sales volume variance, the company sold less quantities of salsa than forecasted. This could be due to a lack of or poor advertising, which did not garner the attention of more customers. Another aspect that we must acknowledge was that the salsa was priced higher than budgeted. That reason could have made customers not purchase more of the salsa or purchase a competitor’s salsa that was
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More tomatoes were used in the process of making the salsa because the organic type of tomatoes spoiled faster, therefore we incurred more waste than expected, and had to use more tomatoes than anticipated Also, a malfunction in machinery was observed. The machines that filled the salsa failed, and filled jars over their capacity, causing salsa to overflow, which further caused waste. To avoid this, we should take various steps to reduce spoilage. The company can introduce policies on how to properly store tomatoes. We can also buy tomatoes more frequently but less in bulk, to avoid waste. Also, when the order of tomatoes arrives, we can hire someone specifically to conduct a quality check. Our company should also consider replacing the old machines to ensure that malfunctions do not happen as frequently. Following this, the direct material usage variance for the jars utilized was unfavorable. Many jars were unexpectedly destroyed on the truck upon arrival, and a substantial number also fell out. The remaining ones that were not destroyed, had a defect that caused them to leak. The jars did not hold the product, which contributed to the direct material usage variance of tomatoes as well. Since not all jars were usable, this increased the amount of jars needed than originally planned. To combat this issue, we should explore purchasing jars from another seller that delivers quality jars …show more content…
The company paid workers a higher amount per hour. We had to pay employees more for several possible reasons. First, is that there was a high market demand for employees. We needed to hire more people due to a lack of workers and get them interested in working for the company. To achieve this goal, we had to present potential employees an increased wage to seem desirable. The company had to create an incentive for job seekers to want to be a part of Coyote Loco Salsa. Another reason for this variance is that people working in the tomato and salsa industry went on strike for higher pay, which is a factor that made the hourly wage increase. Lastly, our employees are overall skilled and hard workers, who deserved to be paid more. To reward them for their dedication they were given an unexpected raise. A solution for the direct labor variance is to perhaps hire temporary workers and increase our number of employees during times of higher demand, and less during periods of time that are
The objective of paying our employees is to increase employee satisfaction and loyalty. Northwestern sends too much on recruiting and education to see a majority of its employee leave before they are able to have a full career as a financial advisor. By paying their employees northwestern is able increase employee productivity, increase the employee’s lifespan at the company, which will increase the number of clients northwestern will have as well.
In the world of party chips and zesty dips, the Sensational Salsa company has created a new brand of salsa flavor. Having believe that they have created a culinary masterpiece, the company has already produced a mountains worth of their new salsa flavor. However, when they begin selling the salsa, they were shocked when the statistic showed that many children and adults did not enjoy the taste of their new flavor. Devastated by the news, the Sensational Salsa company deployed a questionable tactic to persuade more people into buying their salsa and change their attitude towards their product: they plan to pay off parents to lie on Facebook about how much they enjoyed the salsa. By employing this method of persuasive communication, the Sensational Salsa company will try to change the attitude the public has of their product both cognitively and affectively.
The 3 percent decline in sales causing a 21 percent decline in profits can be attributed to the identification of the accounting concept of operating leverage. Operating leverage is what business managers apply to boost small changes in revenue into sizable changes in profitability. Fixed cost is the force managers use to attain disproportionate changes between revenue and profitability. Therefore, when all costs are fixed every sales dollar contributes one dollar toward the potential profitability of a project. Once sales dollars cover fixed costs, each additional sales dollar represents pure profit. A small change in sales volume can significantly affect profitability (Edmonds, Tsay, & Olds, 2011). So, therefore, if sales volume increases,
Toys had a favorable price variance even though they sold less units then they had forecasted. While the price variance is considered favorable as G.G. Toys received a higher than anticipated price, it can also be considered unfavorable. Charging a higher price for the dolls may likely result in less sales which could be one reason for the difference in quantity. It is also possible that a larger quantity of the higher priced dolls were sold which would result in higher sales dollars but a smaller quantity of dolls. It would be beneficial for G.G. Toys to research the quantity of each doll type sold and their price point to determine if this is
One of the key issues faced by McGraw is that there is a large gap between his projections for next year, and what the manager’s are promising him . His goal is to obtain a 15% increase in the operating income from his division (OM, LR and NP). The managers are projecting a decrease of 5.2% from the current year. In absolute terms there is a gap of $27 MM in the projected divisions operating income.
As demonstrated in the graph, labor costs increased as a percentage of revenue in 2016, to 28.3%. This was due to lower sales in Chipotle
Throughout the nineteenth century the idea that the capitalistic government should not have much say in business was spread over Europe and the United States. Instead it was was thought that the economy had natural order and would keep itself at equilibrium without federal intervention on prices and wages. History shows this strategy made the economy more efficient in terms of how money was spent towards peoples own self- interests. Fast forward to the twentieth century when the more liberal ideas about business and state separation spread, acts and laws enforced by the state set standards for workers and employers. 1938 was the initiation of the Fair Labor Standards Act that created a wage floor at $0.25 per hour. Getting paid overtime was now a law as well. Then in the early 2010’s, almost four and a half million employed persons were paid the national minimum wage (which was obviously raised over the years to $7.25) While this sounds like a large number of people, keep in mind that unemployment was at its highest in 2010 since before 1990. Therefore, there is a direct correlation between increased unemployment and heightened minimum
F. REV Cloud Candy prospered at Market Day and became very profitable. One of the main reasons is due to the fact that the product we were selling was one of a kind at the TBR Market. Our business was one of only two businesses with cotton candy as our product. Because of this our direct competition was very low. In contrast, other companies that sold products that were very common such as cookies or cupcakes had very high direct competion. These companies would have to ensure that their product had a certain quality that made them stand out from their competition. In addition, other companies also had a very high operating cost. They would find that they had a very high revenue; however, because their operating cost
If we wanted to make a profit, we should be selling something that we know would appeal to the masses. As a result, we simplified our product. We dropped the entire mocktail campaign and switched to simply selling good, old, plain lemonade. We determined that the production costs of canned lemonade was nearly half of what the production costs of our mocktail lemonade were and determined that the break even point to make our money back was significantly lower. While we would have had to sell 75 cups of mocktail lemonade to make our money back, we only needed to sell about 40 cups of canned lemonade to reach our break even point. Taking this smart approach provided us with the opportunity to focus more on marketing. Had we stuck to our initial plan and sold the same amount of lemonade as we had on lemonade day with our final product, we would have obtained our break even point, however, we also would have made a significantly lower profit. This discovery influenced us to entirely switch up our product
It helps management to carry out proper profit planning work. It creates cost consciousness in the minds of every employee of a business organization (accountlearning 2018). The detriment of variance analysis such as flexible budget variance is that it needs more time to prepare, delays the issuance of financial statements, does not measure revenue variances, and may not be applicable under certain budget models (Bragg, 2017). Additionally, a static budget is not effective for evaluating the performance of cost centers. Similarly, when revenues are much higher than expected, the managers of cost centers have to spend more than the amounts indicated in the baseline static budget, and thus seem to have unfavorable variances, though they are simply doing what is needed to keep up with customer demand (Bragg,
The key reason may be due to extreme cost of sales with respect to revenue earned. • Operating profit Margin Operating profit margin is calculated to measure the company’s
Because of this, many employees tend to leave when they have found a job with higher pay. This increases the training costs for their employees, as they tend to not stay for too long.
1. What limits the usefulness to managers of fixed budget performance reports? Flexible budget performance reports have limited usefulness because they do not reflect differences in revenue and variable costs that can occur simply because the actual volume is different from the budgeted volume. This is a serious limitation when evaluating the reasonableness of actual revenues and costs. 2.
the protests included low-wage employees who work in home care, child care, airports, retail and as adjunct professors.” Because the protests have started, McDonald’s workers have realized that they haven’t been paid fairly for how much they work. Raising the legal amount would let McDonald’s pay their workers barely the legal amount, but the workers would get the money they deserve for all their hard work. Without a doubt, McDonald’s workers deserve a high pay raise considering how long and hard they
Wages and benefits are the key motivation that people go to their jobs every day; besides their hourly wage or annual salary, majority of employees have access to employer-sponsored health care coverage, paid vacation, and other benefits (Findlaw.com, n.d.). So, when it comes to negotiations, wage disputes are by far the most prominent causes of strikes when labor unions and employers reach a stalemate during these talks (Sloane & Witney, 2010). Over the past decade, wage-related issues have accounted for approximately 40 percent of all such work stoppages (Gorman, 2004). Since employee wages are normally their only source of income, we can see why they play such a significant and contentious part in labor unions and management relationships (Gorman, 2004). That is why basic wage rate, overtime, differentials, and adjustments are the most significant issue...