Q11, May 2011 The Budget vs Actual comparison for Division ABC of Company X at the end of half year

was as follows: (All figures are Rs. in lacs) Budget Actual 400 370 240 218 60 60 20 14 80 78 200 206 80 74

Sales Material and other variable cost Employee and other fixed cost Sales Promotion Operating Profit Net Working Capital Fixed Assets

For this Division, which areas of performance would you like to investigate and what corrective action, if any, you would like to put in place.

Q11, May 2011 (All figures are Rs. in lacs) Parameter

F: Favourable

Factor

Price /Cost Actual Variance

(Actual minus Flexible Budget)

Flex Budget

A: Adverse Volume Original

Variance
(Flexible Budget minus Original Budget)

Budget

Total Variance
(Actual minus Original Budget)

Sales Material and other variable cost Contribution Employee and other fixed cost Sales Promotion Operating Profit Net Working Capital Fixed Assets Ratios: Contribution to Sales (%) Operating Profit / Sales (%) Long term investment (FA+NWC) ROI Fixed Assets Turnover (Sales/FA) 1 2 3 4 5

0.6 0.4

370 218 152 60 14 78 206 74

0 (4) 4 0 (6) 10

F F F F

370 222 148 60 20 68 185 74

-30 -18 -12 0 0 -12

A F A

400 240 160 60 20 80 200 80

-30 -22 -8 0 -6 -2 6 -6

0.5 5

21 A 0

-15 F -6 F

41.08% 21.08% 280 27.86% 5.00

40.00% 18.38% 259 26.25% 5.00

40.00% 20.00% 280 28.57% 5.00

Comments: The main reason why the performance is below budget is the lower level of sales This is also reflected by the company underutilising its Sales Promotion Budget by Rs. 6 lacs. The Mtl and VC as a percentage to Sales was lower at 58.92%(218/370) as against the budget of 60% (222/370) As a result, the contribution was higher at 41.08% (152/370) as compared to the Budget of 40%(148/370) The company's utilzation of Net Working Capital was unfavourable at 55.68% (206/370) as compared to 50% (either 185/370 or 200/400) as per Budget 6 The Fixed Aset turnover (Sales/FA) was as per the budget of 5 times.

7 ROI is marginally lower at 27.86% compared to budget of 28.57%

Original Budget)

A F A F A A F