ANNEX A

Product X
Standard cost of materials: 4*0,15+12*0,25+8*0,05= 4
Standard cost of labor: 2.5*1.6+2.5*1.2=7
Standard cost of production OH: (1143000:635000)*5=9
Standard cost of selling and administration: (50%+25%)*20=15
Standard cost of product: 20+15=35
Standard selling price: 35%/0,395=88,6
Budgeted sales volume: 800000/88,6=9030
Budgeted production: 9030+5000=14030
Budgeted usage of M2: 14,030*4=56120
Budgeted usage of M3: 14,030*12=168360
Budgeted usage of M4: 14,030*8=112240

Product Y
Standard cost of materials: 0,1*18+0,15*14+0,25*10= 6,4
Standard cost of labor: 1,6*1,5+1,5*1,2=4,2
Standard cost of production overhead: (1143000:635000)*3=5,4
Standard cost of selling and administration: (50%+25%)*16= 12
Standard cost of product: 12+16=28
Standard selling price: 28/0,395 = 70,9
Budgeted sales volume: 1280000/70,9=18053
Budgeted production= 18053+10000=28053
Budgeted usage of M1: 28053*18=504954
Budgeted usage of M2: 28053*14=392742
Budgeted usage of M3: 28053*10= 280530

Product Z
Standard cost of materials: 0,1*24+0,25*6+0,05*18=4,8
Standard cost of labor: 1,6*3+1,2*3=8,4
Standard cost of production OH: (1143000:635000)*6= 10,8
Standard cost of selling and administration: (50%+25%)*24=18
Standard cost of product: 24+18= 42
Standard selling price: 42/0,395=106,3
Budgeted sales volume:24000000/106,3=22577
Budgeted production=22577+10000=32577
Budgeted usage of M1= 24*32577=781848
Budgeted usage of M3= 5*32577=163885
Budgeted usage of M4=18*32577=586386

Budgeted purchase of M1= 504954+781848+90000=1376802

Budgeted purchase of M2= 392742+56120+36000= 484862
Budgeted purchase of M3= 168360+280530+163885+42000=654775
Budgeted purchase of M4 = 112240+586386+ 54000= 752626
Budgeted materials purchases =
0,1*1376802+0,15*484862+0,25*654775+0,05*752626= 411734

a,
Standard cost of material
Product X (M2, M3, M4)=4*0.15+12*0.25+8*0.05=4
Product Y (M1, M2, M3)=18*0.1+14*0.15+10*0.25=6.4
Product Z (M1, M3, M4)=24*0.1+6*0.25+18*0.05=4.8
Standard cost of labor
X=2.5*1.6+2.5*1.2=7
Y=1.5*1.6+1.5*1.2=4.2
Z=3*1.6+3*1.2=8.4
Product OH
X=1143000:635000*5=9
Y=1143000:635000*3=5.4
Z=1143000:635000*6=10.8
Production
X=4+7+9=20
Y=6.4+4.2+5.4=16
Z= 4.8+8.4+10.8=24
Selling and Administration
X=50%+25%*20=15
Y=50%+25%*16=12
Z=50%+25%*24=28
Product
X=20+15=35
Y=12+16=28
Z=18+24=42
Standard selling price
X=35:0.395=88.6
Y=28:0.385=70.9
Z=42:0.395=106.3

b,
Budgeted sale volumn
X=800000:88.6=9.030
Y=1280000:70.9=18.059
Z=2400000:106.3=22.578
c,
Budgeted production
X=9.030+5000=14.030
Y=18.053+10000=28.059
Z=22.578+10000=32.578
d,
Budgeted usage of M1
Y=28.059*18=505.062
Z=32.578*24=781.872
M2
X=14.030*4=56.120
Y=28.059*14=392.826
M3
X= 14.030*12=168.360
Y=28.059*10=280.059
Z=32.578*6=195.468
M4
X=14.030*8=112.240
Z=32.578*18=586.404
Budgeted purchase of M1 (kg)=505.062+781.872+90.000=1.376.934
Budgeted purchase of M2 (kg)=56.120+392.826+36.000=484.946
Budgeted purchase of M3 (kg)=168.360+280.059+195.468+42.000=686.418
Budgeted purchase of M4 (kg)=112.240+586.404+54.000=752.644
=> Budgeted material purchase=(1.376.934*0.1) + (484.946*0.15) + (686.418*0.25)
+ (752.644*0.05)=419,672

1. Incremental budgeting
According to Budgetary Models, CIPFA (2009), incremental budgeting or traditional
budgeting or annual budgeting is a way of making the budget on the basis of the
previous budget with adjusting it (adds or subtracts) based on sales forecasts, market
demand, new developments, capacity of production.

Advantages Disadvantages
Simplicity Promotes unnecessary spending
Incremental budgeting is the easiest Incremental budgeting can result in
budgeting approach. Since it uses the unnecessary spending for a company. The
budget for the current period to project the reason behind this is that the departments
future budget, it does not require complex within a company generally tend to spend
calculations. Also, only a few assumptions all the money that they’ve been allocated
are required in the budgeting method. in a budget one year in order to obtain a
Finally, the method’s simplicity allows the greater amount of money in the next
company’s management to save time on budgeting period. Incremental budgeting
the budgeting process. takes the position of increasing each part
of the budget by a certain amount each
year. However, some departments may
not, in fact, need more money each year –
but they will be allotted an increase
anyway, simply because that’s how the
budgeting process works. In this way, the
budgeting process may be wasteful and
less than optimally efficient.

Consistency and operational stability Discourage innovation

The dependence on the figures from the This type of budgeting may discourage the
budgets of previous periods ensures that production of innovative ideas and growth.
the budgets remain fairly consistent and Since new budgets are based on figures
relatively stable over time. Consistency from previous budgets, there is a little
and operational stability room for the financing of completely new
ideas or activities. Thus, the budgeting
process discourages the implementation of
new ideas and fosters a conservative
business environment.
Funding Stability Fails to account for changes and
Incremental budgeting may also help external factors
ensure that funding remains stable over The key assumption behind incremental
time, as expenses are relatively easy to budgets is the constant stability of the
project. This can be helpful for companies company’s operations. Therefore, the
with projects that require funding for budgets are typically not responsive to
multiple years. potential changes that can result from
unforeseen circumstances or some
unanticipated factors.

Reduce internal rivalry Lacks an incentive for a comprehensive

Incremental budgeting generally allocates review
equal incremental changes to the budget The stability of incremental budgets does
from one year to the next. Thus, not provide any incentives to the
departments within a company are not company’s management for reviewing its
forced into a position of competing with budgets with a view to realizing savings in
each other to obtain a larger portion of the expenditures. The lack of a review process
budget. makes budgets vulnerable to waste,
inadequate assumptions, and mistakes.

(Incremental Budgeting - Overview, Advantages, Disadvantages, 2021)

Example
An example of an incremental budgeting approach is to look at working capital. If a
business uses a 5 per cent increment, we can look at the working capital requirement for
the previous period and increase it by 5 per cent to arrive at the new budget allocation
for working capital. Assuming our previous period allocation was $100 the budgeted
allocation under incremental budgeting would be $105. The same percentage would be
applied to all line items in the budget to arrive at a budget for the new period. Like any
method in business, it has its advantages and disadvantages (Borad, 2021).

Real application
At a certain government department office in the New Territories, the officer-in-
charge, Wong Kar Ming, was faced with the possibility of having surplus funds of
around $150,000 at the fiscal year-end. Kar Ming found methods to spendthe extra
money before the year ended. He posted an internal notice to colleagues saying that
those who lived in Kowloon and Hong Kong Island were welcome to apply for a travel
allowance. Brand new office furniture was acquired for a new section (before office
furniture was centrally dispatched from the governmentwarehouse). The inefficiency
and wastage portrayed are often perpetuated and encouraged by incremental budgeting.

2. Accordingly to the Chartered Institute of Management Accountants of England, “a

fixed budget is a budget outline to remain unchanged irrespective of the level of actual
activities attained”. A static budget will reflect the expected result or revenues of a
budgeting year (Hansen and Mowen, 2011) of a responsibility center for one level of
activities.
The advantage of fixed budget is to help the business to prioritize the expenses. Fixed
budget clearly distinction between the businesses needs and wants by forcing the
business to remain consistent, it will also ensure that the bills are paid on time (Scott &
Hascall, 2002).

The disadvantage of fixed budget as it’s operates to one level of activity- the planned
activity and it does not account for the business unpredictable activity. The actual
always will be captured by a level of activity which is significantly difference from the
planned activity. For example, to compare the actual production cost increased at
production levels of 1000 units against a standard based on planned activity of 500 units
could be misleading. Management will mislead thinking into that the production costs
are out of control. An increase in production cost is avoidable as volume increases and it
does not means that there is problem on increase cost occurred (Scott & Hascall, 2002).

Example

Administrative functions such as accounting and human resources may have a fixed
budget as they are somewhat isolated from the short term effects of business volumes
(Spacey, 2021).

Customer Support A customer support team has a fixed budget for two shifts of 12
people and one shift of 4 people each day of the year. The firm has a product failure
resulting in surging call volumes and has no pool of resources to respond to the
increased volumes. As a result, wait times for customers peak to unreasonable levels
(Spacey, 2021)
Real application

J.C. Plumbers, Co. is a plumbing and repair business. The company operates from a
large warehouse and office building where it stores its supplies, equipment and
inventory. J.C. Plumbers uses a static budget to project its expenses for a 30-day
budgetary period, and the fixed values in the fixed budget are:

 Warehouse and office rent: $6,500

 Utilities and waste disposal: $1,500
 Employee payroll: $18,000

So the company's 30-day fixed budget is $26,000. J.C. Plumbers uses a fixed budget in
place of an operational budget because the business expects to cover the value of these
expenses on a regular basis. Sales, repair jobs, construction work or other service sales
are not used to determine the value in the company's fixed budget. Additionally, the
company's financial manager may use the fixed budget independently of other
budgeting methods (Bragg, 2021).

3. According to CIPFA (2006), zero-based budgeting in its purest form “involves the
preparation of operating budgets on the assumption that the organization is starting out
afresh in the new planning period – it as is the life of the organization exists as a series
of fixed-term contracts.”

Advantages Disadvantages
Managers Must Justify All Operating Can Reward Short-Term Thinking
Expenses One of the major shortcomings of zero-
Zero-based budgeting ensures that based budgeting is that it can reward short-
managers think about how every dollar is term thinking by shifting resources toward
spent, every budgeting period. This areas of companies that will generate
process also forces them to justify revenue over the next calendar year or
all operating expenses and consider which budgeting period. As a result, some areas
areas of the company are of companies that are typically viewed
generating revenue. as long-term investments that aren't
directly tied to revenue, such as research
and development or worker training, may
 be left with smaller budgets than they
actually need. This could possibly hurt a
company because, although these areas
won't be generating revenue in the near
term, they're often the keys to remaining
competitive over the long term.

Keeps Legacy Expenses in Check Resource Intensive

In traditional budgeting, legacy costs may Zero-based budgeting is also resource-
not be examined for years until there is intensive. It takes a lot more time and
some sort of economic shock that forces effort to closely review and justify every
the company to take extreme actions. budget element rather than modify an
Expenses have a tendency to grow over existing budget and review only new
time, with each department protecting its elements. Because of this, some critics
budget from cuts. This approach can be argue that the benefits of zero-based
myopic and, over time, it can lead to budgeting do not justify its time cost.
significant misallocation of resources. If
done correctly, zero-based budgeting can
prevent this from happening.

(Zero-Based Budgeting: Benefits and Drawbacks, 2021)

Example

Each year the cost of the outsourced part increases by 5%. Using a zero-based
budgeting process might lead the manufacturing company to look at other alternatives
for producing this key part. They might look internally to see if the part couldn't be
produced internally by the company's own manufacturing department. A zero-based
budgeting process could lead the company to question not only the ever-increasing cost
of this outsourced part, but perhaps other costs related to the manufacturing and
distribution in this key product for the company (What Is Zero-Based Budgeting?
Definition and Example, 2021). 

Real application
Companies including General Motors Co., Guess? Inc. and Signet Jewelers Ltd. are
using zero-based budgeting to slash costs and navigate the effects of the coronavirus
pandemic.

At Guess, zero-based budgeting allowed the Los Angeles-based clothing retailer to

identify ways to quickly cut millions in costs during its fiscal first quarter, which ended
May 2, in response to a drop-off in sales as governments temporarily closed retail stores
to stem the virus’s spread.

The company, which had a multiyear plan to trim costs in place before the pandemic,
had not previously used zero-based budgeting as part of its regular financial planning.

But when the coronavirus outbreak emerged in China in January, Guess began a
weekslong, zero-based budgeting review to look at its expenses with fresh eyes, said
CFO Katie Anderson (Broughton, 2021).

4. A flexible budget is a budget that adjusts or flexes with changes in volume or

activity. The flexible budget is more sophisticated and useful than a static budget. The
static budget amounts do not change. They remain unchanged from the amounts
established at the time that the static budget was prepared and approved (What is a
flexible budget? | AccountingCoach, 2021).

Advantages Disadvantages
A flexible budget acts as an ideal financial Formulating and administering a flexible
planning tool in business settings whereby budget is no easy task given that most
costs are closely aligned to underlying costs in a business are rarely variable. A
business activities. Retail environments great deal of time goes towards
would be ideal in this case whereby any formulating fixed cost components and
overhead activity or cost can be separated developing cost formulas that might not
and treated as if they were a fixed cost. work in the end.
Flexible budgets can also act as ideal It is not possible to load flexible budget
financial measuring tools to evaluate figures into accounting software for
management performance. Given that comparison with financial statements. This
output would change based on changes in can only be done upon completion of an
costs and level of production, one can accounting period to be able to issue
gauge whether management policies and financial statements that compare actual
plans are working. In business, budgets and budgeted figures.
should always align expectations with
various levels of production.
Flexible budgeting can also go a long way The flexible budget model only makes it
in updating a budget for which revenue possible to compare actual expenses and
and other figures are yet to be factored in. budgeted expenses. With the model, it is
Managers can use this opportunity to not possible to compare budgeted revenues
verify all fixed costs and variable expenses to actual revenues. Similarly, it is not
before any production operation possible to ascertain whether actual
commences. revenues are higher or lower than
estimates.

(Flexible Budget (Definition, Example) | Advantages & Disadvantages, 2021)

Example

ABC Company has a budget of $10 million in revenues and a $4 million cost of
goods sold. Of the $4 million in budgeted cost of goods sold, $1 million is fixed, and
$3 million varies directly with revenue. Thus, the variable portion of the cost of
goods sold is 30% of revenues. Once the budget period has been completed, ABC
finds that sales were actually $9 million. If it used a flexible budget, the fixed
portion of the cost of goods sold would still be $1 million, but the variable portion
would drop to $2.7 million, since it is always 30% of revenues. The result is that a
flexible budget yields a budgeted cost of goods sold of $3.7 million at a $9 million
revenue level, rather than the $4 million that would be listed in a static budget
(Bragg, 2021).

Real application

Big Bad Bikes company used the flexible budget concept to develop a budget based on
its expectation that production levels will vary by quarter. By the fourth quarter, sales
are expected to be strong enough to pay back the financing from earlier in the year. The
budget shown in (Figure) illustrates the payment of interest and contains information
helpful to management when determining which items should be produced if production
capacity is limited (Graybeal, Franklin and Cooper, 2021).
Source: Flexible Budget for Big Bad Bikes. (attribution: Copyright Rice University,
OpenStax, under CC BY-NC-SA 4.0 license)

5.  Top-down budgeting process is in which the top management takes all the decisions
without any participation from departments or the middle management (Top-Down
Budgeting - Learn About the Top-Down Budgeting Process, 2021).
Advantages Disadvantages
More prioritize on overall business Decreased motivation by lower-level
growth.  managers. 

The executive sets company targets and They feel uninvolved in what they think is
then adjusts the budget. Executives can important. They cannot be actively
allocate resources to departments to drive involved in the budgeting process. By not
the company’s growth, starting with the participating, they may lack the incentive
most critical departments. That contrasts to ensure success.
with the bottom-up approach to budgeting,
which emphasizes departmental targets
first.

Better target synchronization. Bias by executives. 

Each department sets targets according to Executives are often not involved in the
company targets, enabling them to be more day-to-day operations of the company.
synergized. Conversely, under the bottom- They may set unrealistic targets for
up budgeting method, each department sets individual departments. Therefore, lower-
its own targets. It may not align with other level managers may find it challenging to
departmental targets or company targets. implement the budget.

Save more time for small and medium- Less accurate. 

sized businesses. 
Budgets may not be accurate because
Instead of spending time creating budgets department heads are not involved. In fact,
from scratch, executives can formulate they have a better understanding of their
budgets to run in each department. That, of department’s financial needs than company
course, saves time and resources. That executives. Creating a budget without input
lower-level manager only focuses on these from key personnel can result in
targets and day-to-day operations. underfunding or overspending from a
department.

(Borad, 2021)

Example
You work at a healthcare organization, where multiple teams are tackling a project that
will have significant implications on the bottom line, as well as for medical patients
who use your services. As a result, there are a lot of legalities and regulations that need
to be carefully addressed. In this type of situation, your managers may want to take on
more of a top-down leadership role. Since the stakes are quite high, directions should be
coming straight from executives – who likely have the most insight into the project. It’s
also critical to have as much alignment as possible across teams, since it’s easy for
wires to cross on such a complex undertaking (Top-down or bottom-up management:
Which is best for your business? | Torch, 2021).
Real Application
The Martha Stewart Living company, owned and managed by lifestyle expert Martha
Stewart, utilizes the top-down approach - therefore, Stewart makes the decisions, holds
the most equity in the company, and drives the brand awareness due to her worldwide
popularity (Top-Down vs. Bottom-Up Approach | Smartsheet, 2021).

6. Bottom-up budgeting is a process where the budgeting input starts from the
operational level, moves up to the middle, and top level management with full
participation in decision making (Top-Down Budgeting - Learn About the Top-Down
Budgeting Process, 2021).

Advantages Disadvantages
1. Increased Company-Wide 1. Inefficiencies in Creating Plans or
Communication Reaching Goals

With bottom up management, While two minds are better than one, it is also
each employee is actively participating in said that too many cooks spoil the broth.
the decision-making process. When every employee, each of whom has
  varying ideas and opinions, contributes to the
With this involvement of all the decision-making process there can be
employees, overall communication disagreements or conflicts that arise.
between the members company-wide will  
increase. Such conflicts can lead to delays in creating
  plans or reaching goals which can cause
inefficiencies.

2. Easier Problem Solving 2. Increased Responsibilities on employees

Unlike the top down approach, when The responsibility of participating in larger
a problem arises, and the company is decisions adds to the roles and responsibilities
following the bottom up style, a variety of that employees already have.
opinions and experiences go into coming  
up with the solution. This can help come This additional responsibility can sometimes
to solutions more quickly and find more take away from employees’ other tasks or
efficient solutions. from projects they are working on, which can
  cause delays in deliverables.

3. Increases Employee Morale 3. Inaccurate Reflections of Data

Since company-wide decisions and goals In the long term, a variety of people that are
are a collaborative effort and thus each contributing to the same projects
employee will feel included and valued. simultaneously can cause inaccurate results
  and lead to inaccurate decisions.
This inclusion allows for an environment
 
that is supportive and communicative.
This inclusion also allows employees to
feel motivated to work towards reaching
the company’s goals.

(Wilson, 2021)
Example
Your engineering and product teams are working on a new feature for customers. The
purpose of this project is to make the lives of your users easier and strengthen your
relationship with them. In this scenario, it makes sense for your managers to adopt a
bottom-up management approach. Since your engineers are familiar with your
company’s technological capabilities, and your product managers will have the best
sense for what customers actually want, their insights will likely be more valuable than
those from the Head of Engineering, who may not have the same level of visibility
(Top-down or bottom-up management: Which is best for your business? | Torch, 2021).

Real application

Banking companies, like Ernst & Young, use the bottom-up approach to analyze aspects
of their company in comparison to the microeconomic variables of the economy. These
companies in wide-ranging industries benefit from having a well-rounded perception
before jumping to quick decisions that may not have a positive affect (Top-Down vs.
Bottom-Up Approach | Smartsheet, 2021)..

ANNEX B
Revenue center
Customer rejects/total sales (2020): 2,415,527,947/28,135,622,624,229= 0,01%
Customer rejects/total sales (2019): 73,389,095/38,133,790,098,273= 0,01%
We can see that the figures for both 2020 and 2019 were identical, at 0,01%. Customer
rejects in 2020 were higher than in 2019, with a total of 2,342,138,520. Therefore, the
revenue in 2020 was affected badly. In particular, revenue in 2020 was
$9,998,167,473,974 lower than in 2019. Thus, the quality of product stays the same.
Customers are returning product more frequently in 2020 because product quality is not
guaranteed, resulting in a negative image for the company when sued in court for poor
product quality and having to pay damages. In the short-term, it is an insignificant issue.
The company maintain its quality very stability. However, in the long-term, the
company needs to focus more on improving quality, service, and safety to build
customer trust and help the company's reputation and revenue growth.

Profit center
Cost/sales ratio (2020)= cost of goods sold and services/revenue from sales goods
and provision = 19,460,229,052,562/ 28,135,622,624,229=69%
Cost/sale ratio (2019)= cost goods sold and services provided/ revenue from sales
goods and provision= 28,348,430,809,281/38,133,790,098,273=74%
We can see that the figure for 2020 was 5% lower than that of 2019 because COGS and
sales ratio in 2020 dropped by 8,888,201,756,719 and 9,998,167,473,974 respectively
compared to 2019 and sales difference was 1,109,965,717,255 higher than COGS
difference. This shows that Sabeco's production is very efficient and the direct costs
arising from the production of Sabeco's sold goods are reduced, resulting in the
company saving on production costs. In particular, selling expenses in 2020
(144,253,936,352) decreased by 6,738,802,177.65 compared to 2019
(3,003,290,717,435) or raw materials cost included in production cost in 2020
(5,367,647,284,900) decreased by 534,482,633,663 compared to 2019
(5,902,129,918,563). Therefore, Sabeco would save the cost of goods sold compared to
last year.

Gross profit/sales (2020)= 8,501,094,784,449/28,135,622,624,229=30%

Gross profit/sales (2019)= 9,550,628,692,014/38,133,790,098,273=25%
We can see that gross profit in 2020 increased 1,049,533,907,565 when comparing with
2019. Also, the gross profit margin in 2020 has increased slightly by 5% compared to
2019 because cost of goods sold in 2020 (19,460,229,052,562) was lower than that in
2019 (28,348,430,809,281), which shows that Sabeco is operating in a positive
direction. The rising profit margin means that Sab eco is doing well. At this time, from
the production process to the product quality, there is stable uniformity. The company's
competitive advantage has also been solidly consolidated.

Net profit/sales (2020)= 4,936,845,970,254/28,135,622,624,299=17.5%

Net profit/sales (2019)= 5,370,147,708,542/ 38,133,790,098,273=14,08%
We can see that there was an increase in net profit margin (3.42%) in 2020, which
shows a positive sign when the business is operating efficiently and saving costs. In
particular, Sabeco's selling expenses in 2020 are 2,859,036,781,083 and
3,003,290,717,435 in 2019 or general and administration expenses in 2020 are
702,005,344,515 and 1,047,841,925,145 in 2019. One of the reasons was Sabeco
launched many programs to reduce the consumption of raw materials and packaging. In
addition, the average aluminum price also decreased by nearly 15%, which had a
positive impact on corporate profit margin.

Investment center
Capital employed or net assets (2020)= 986.653.164.558+21.215.276.390.928=
22.201.929.555.486
ROI= 6.111.818.325.965/22.201.929.555.486= 27,53%
Capital employed or net assets (2019) = 798.398.984.642+20.076.247.056.364=
20.874.646.041.006
ROI= 6.686.176.624.962/ 20.874.646.041.006= 32%
According to ROI in both 2020 and 2019, the figure for 2020 decreased slightly by
4.47% compared to that of 2019, simply because while gross profit in 2020 decreased
by 1,049,533,907,565, net assets in 2020 increased by 1,327,283,514,480. That means
the net asset difference was 277,749,606,915 higher than the gross profit difference.
Moreover, the profit margin in 2019 is bigger than in 2020 because, in 2019, Sabeco has
a higher market share (40%) compared to that of 2020 (33.5%).

COMPARE SABECO WITH HABECO

Name of SABECO HABECO
center
 Customer rejects/total sales (2020): Customer rejects/total sales (2020):
Revenue 2,415,527,947/28,135,622,624,229= 0,01% 0/ 7,514,370,576,606= 0%
center Customer rejects/total sales (2019): Customer rejects/total sales (201
73,389,095/38,133,790,098,273= 0,01% 446,154,000/9,405,060,375,402= 0%

As we can see that the Figure for both 2020 and 2019 in 2 companies were identi
However, there are some differences. Firstly, customer rejects of Sabeco and Habeco w
Compare 2,415,527,947 and 0. This shows that in 2020 Habeco's product quality customer serv
were better, so there are were no returned goods. However, customers reject of Habeco
2019 was higher than its of Sabeco in 2020 with 372,764,905. Generally, the total
customer rejects of Sabeco in 2019 and 2020 (2,488,917,042) were higher than its of Hab
(446,154,000). In conclusion, the two companies' product quality is good and everyone tr
them.
Cost/sales ratio (2020)= cost of goods sold Cost/sales ratio (2020)= cost of goods
and services/revenue from sales goods and sold and services/revenue from sales
provision = 19,460,229,052,562/ goods and provision
Profit center 28,135,622,624,229=69% =5,473,064,507,898/7,514,370,576,606
Cost/sale ratio (2019)= cost goods sold and 3%
services provided/ revenue from sales goods Cost/sale ratio (2019)= cost goods sol
and provision= and services provided/ revenue from
28,348,430,809,281/38,133,790,098,273=74% sales goods and provision=
6,878,041,273,589/9,405,060,375,402=
%
Sabeco has a very efficient operation process and saves a lot of money on raw materials
labor costs because COGS in 2020 decreased significantly by 8,888,201,756,719 compa
to 2019. In Habeco company, COGS in 2020 decreased by 1,404,976,765,691 from
previous year. In particular, the cost of raw materials in 2020 was 112,608,348,89
decrease of 43,594,992,628 from 2019 (156,203,341,521). However, this figure
insignificant because it only saves Habeco a small amount of material and labor co
Generally, Sabeco's manufacturing process is more efficient and cost-effective t
Habeco's.
Gross profit/sales (2020)= Gross profit/sales (202
8,501,094,784,449/28,135,622,624,229=30% 1,979,527,601,546/7,514,370,576,606=
Gross profit/sales (2019)= %
9,550,628,692,014/38,133,790,098,273=25% Gross profit/sales (201
 2,457,163,774,148/9,405,060,375,402=
%

As you can see from the data above, the gross profit margin of Sabeco increased slight
5% compared to 2019 because the cost of goods sold in 2020 (19,460,229,052,562)
lower than that in 2019 (28,348,430,809,281). Whereas the gross profit margin of Hab
was identical (26%) because the cost of goods sold in 2019 and 2020 has not too m
change. In conclusion, Sabeco's business situation is improving due to rising profit marg
This demonstrates that Sabeco's manufacturing process and product quality are m
effective than Habeco's. Also, Habeco's profit margin remains unchanged, indicating that
company's business activities are meeting some difficulties as well as the prod
manufacturing process has not significantly improved.
Net profit/sales (2020)= Net profit/sales (202
4,936,845,970,254/28,135,622,624,299=17.5% 660,588,740,136/7,514,370,576,606= 9
Net profit/sales (2019)= 5,370,147,708,542/ Net profit/sales (201
38,133,790,098,273=14,08% 523,127,874,893/9,405,060,375,402=6

We can see that there was an increase in net profit margin in 2 companies with 3.42%
3%, which shows a positive sign when 2 businesses are operating efficiently and sav
costs. Thanks to good management, related costs can be reduced such as financial co
business administration costs such as financial expense, general and administration expen
… For instance , financial expenes of Sabeco and Habeco in 2019 were 105,449,377,566
31,271,567,333 and in 2020 were 93,009,586,460 and 24,321,027,003.

Investment Capital employed or net assets (2020)= Capital employed or net assets (202
center 986.653.164.558+21.215.276.390.928= 3,183,319,157,800+5,735,538,015,573
22.201.929.555.486 8,918,857,173,373
ROI= 6.111.818.325.965/22.201.929.555.486= ROI=
27,53% 767,247,323,173/8,918,857,173,373= 9
Capital employed or net assets (2019) = Capital employed or net assets (2019
798.398.984.642+20.076.247.056.364= 3,575,656,866,108+5,181,563,191,747
20.874.646.041.006 8,757,220,057,855
ROI=6.686.176.624.962/ 20.874.646.041.006= ROI=
32% 669,523,420,701/8,757,220,057,855=8
 As can be seen, Sebeco's ROI in 2020 decreased by 3.42% compared to 2019 w
Habeco's ROI slightly by 1% compared to 2019. Besides, total ROI of Sabeco in 2019
2020 were 59.53%. While Habeco's ROI was 17%. This shows that Sabeco's business is v
efficient, the company's profits are high and the investment potential is huge compared
Habeco. Sabeco's high ratio means that the company has a high position in the industry
well as holding a high share in the market. Specifically, Sabeco holds the highest share in
market (39.6%) while Habeco only accounts for 10.9%, a huge gap.

ANNEX C
1. Direct material price and usage variances:
AR/kg*Actual kg=159,900 3900 (A)
Budget price/kg*Act/kg=20*7800=15600
Budget price/kg*std/kg=200*800=1600 4000 (F)
=> 100 (F)
The material price variance is unfavourable because the budget price per kilogram is
lower than the actual price per kilogram. The reasons for unfavourable material variance
occurrence is that Thaco Group may have bought materials that cost more than its
standard cost. Therefore, the business should revise budget price per kilogram.

2. Direct labour rate and efficiency variances

AR/hour*Actual h=24,150 1050 (F)

BR/h*Act hour=6*4200=25200
BR/h/*std/hour=30*800=24000 1200 (A)
=> 150 (A)
The rate variance is favourable because the standard rate is higher than the actual rate.
The efficiency variance is unfavourable because the standard hour is lower than the
actual hour. The company should increase standard hours or decrease actual hours by
avoiding its employees to work more than standard hours.
3. The variable overhead expenditure and efficiency variances

AR/h*Actual h=4900 700 (A)

BR/h*Act/h=1*4200=4200
BR/h/*std/hour=5*800=4000 200 (A)
=> 900 (A)
The spending variance is unfavourable because the standard rate is lower than the actual
rate. The reason is that Thaco Group has spent more than its standard cost. Thus, the
company need to decrease the actual rate or increase standard rate.
The efficiency variances is unfavourable since the standard hour is lower than the actual
hour. The reason is that Thaco Group has a lot of skilled workers which make the labor
work overtime, requiring the company to pay overtime wages. Hence, the company
should decrease actual hours.

4. The fixed overhead expenditure and volume variances + 5. The fixed overhead
capacity and efficiency variances
Act rate/h*Actual hour = 47000 2000 (A)
Bg rate /hour*bg hour =10*5*900=45000
Bg rate/h/*Act hour=10*4200=42000 3000 (A)
Bg rate/h*Std hour = 10*5*800=40000 2000 (A) => 5000 (A)

The expenditure variance is unfavourable since the budget rate is lower than actual rate.
The reason is Thaco has spent more than its standard cost so the business need to
decrease the actual rate.
The capacity variance is favourable because the actual hour is lower than the budget
hour, which means that the production process is quicker than the budgeted time.
The efficiency variance is unfavourable because the standard hours are lower than the
actual hours. The company should decrease actual hour or increase the standard hours.
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