Gr o u p 1

Manageme 2 x+
1

3 x + 2x
nt control
Assignment 2
BE F OR E W E
S TAR T
Team’s member
• Phạm Kỳ Duyên
• Phạm Minh Hà
• Đỗ Quỳnh Phương
• Trần Quỳnh Anh
• Nguyễn Phúc Bằng An
 PART 1
Spring Ltd. is a textile company that produces T-shirts, and aims at maximizing profit. Its strategy is to produce T-shirts
with reasonable prices for medium- and low income customers who currently account for a very large market share.
Spring Ltd. follows mass production therefore.
In June 2021, the budget and performance of Spring are as follows:
Budget Actual performance
Sales
Selling price VND 400,000/T-shirt VND 390,000/T-shirt
Sales volume 4,000 T-shirts 3,400 T-shirts
Fixed overheads VND150 million VND145 million
Variable costs
Raw materials costs 4,000 T-shirts* (1.6m of fabric/T-shirt)* 4,200 T-shirts* (2m of fabric/T-
(VND50,000/m) shirt)*
(VND46,000/m)
Direct labour costs 4,000 T-shirts* (0.5hours/T-shirt)* 4,200 T-shirts*(0.6hours/T-shirt)*
(VND120,000/hour) (VND110,000/hour)
Variable overheads VND 180 million VND210 million
PART 1
Required:
i) Calculate the profit variance for Spring in June 2021
ii) Break down the profit variance calculated into different related
variances
iii) If Spring specifies 10% of budget is a threshold for adverse
(unfavorable) variance, specify which variances should be
analysed? Provide some possible reasons for such variances
Question #
1
a) Calculate the profit variance for Spring in June 2021
Profit variance = Actual profit – Budget profit

Actual profit = ( 390,000*3,400 - 145,000,000 - 3,400*2*46,000 - 3,400* 0,6*

110,000 *(210,000,000/4,200) * 3,400)
= 473,800,000

Budget profit = (400,000*4000 - 150,000,000 - 4000*1,6*50,000 -

4000*0,5*120,000-180,000,000)
= 710,000,000

Profit variance = 473,800,000 – 710,000,000

= (236,200,000) (Adverse)
Quest i o n 1 b/ Break down profit variance calculated into different related
variances
1. Sale variances
• Sale price variance = (Actual price – Budget price) * Actual
sale volume
= (Pa - Pb) * Qa
= (390,000 – 400,000) *3400
= (34,000,000) (A)
• Sale volume variance = (Actual sale volume – Budget sale
volume) * Budget price
= (Qa - Qb) * Pb
= (3,400 – 4,000) *400,000
= (240,000,000) (A)
Quest i o n 1 2. Direct material variances
• Material price variances = (Pa-Pb) * qa * Qa
= (46,000 - 50,000) * 2 * 3,400
= (27,200,000) (F)
• Material efficiency variances = (qa - qb) * Pb * Qa
= (2 – 1.6) * 50 * 3,400
= 68,000,000 (A)
• Material usage variances = (Qa - Qb) * Pb * qb
= (3,400 – 4,000) * 50 * 1.6
= (48,000,000) (F)
• Total material variances
= (27,200,000) + 68,000,000 + (48,000,000)
= (7,200,000) (F)
3. Direct labour hour variances
• Wage rate variance = (wa - wb) * ha * Qa
G oo d
= (120,000 – 110,000) * 0.6 * 3,400
= 20,400,000 (F)
• Labor efficiency variance = (ha – hb) * wb * Qa
= (0.6 – 0.5) * 120,000 * 3,400
j o b!
= (40,800,000) (A)
• Volume variance = (Qa - Qb) * wb * hb
= (3,400 – 4,000) * 0.5 * 120,000
= (36,000,000) (F)
4. Total direct labour hour variances
= 20,400,000 (F) + (40,800,000) (A) + (36,000,000) (F)
= (15,600,000) (F)
5. Variable overheads variances
• VO rate variances = (VORa - VORb) * ha
G oo d
= (90,000 – 83,333) * (3,400 * 0.6)
= 13,600,000 (F)
• VO efficiency variances = (ha - hb) * VORb
= [(3,400 * 0.6) - (3,400 * 0.5)] * 90,000
j o b!
= (2,040 - 1,700) * 90,000
= 30,600,000 (A)
• Total variable overheads variances = 13,600,000 +
30,600,000
= 17,000,000 (A)
6. Fixed overheads variances = Actual fixed overheads -
budget fixed
c) When Spring specifies 10% of budget is a threshold for adverse
(unfavorable)
variance, if the absolute amount of any variance is higher than threshold,
it should be analysed:
Threshold (10% Variances Be analysed
of budget)
Sale price 160,000,000 34,000 (A)
Sale volume 160,000,000 240,000,000 YES
(A)
Material cost 27,200,000 27,200,000
(F)
Material usage 27,200,000 48,000,000 YES
(F)
Material 27,200,000 68,000,000 YES
efficiency (A)
Labour rate 20,400,000 20,400,000
.
(F)
 Threshold (10% Variances Be analysed
of budget)

Labour efficiency 20,400,000 40,800,000 YES

(A)
Labour volume 20,400,000 36,000,000 (F) YES

Variance overhead 15,300,000 13,600,000 (F)

rate
Variance overhead 15,300,000 30,600,000 YES
efficiency (A)
Fixed overhead 15,000,000 5,000,000 (F)
expenditure
.
 Explanations:
There are items which will be analysed since their variances are
higher than
specified threshold, which is 10% of flexible budget.
Actual sale volume is significant lower than budget sale volume, with
600 T-shirt
or 15% decrease, hence the sale volume variance is much less than
accepted
difference. The reason explained for this unachievable sale volume
target may
come from ineffective selling activity.
Material usage and labour volume variances are higher than its
corresponding
thresholds since actual sale volume is lower than budget sale volume.
Material efficiency variance is VND 68,000,000 (A). This means that
Spring
consumed material more than budget. Actually, each products
consumes 2m of
fabric/T-shirt rather than 1.6 m of fabric/T-shirt as budget. There are
several
reasons could be mentioned in here:
• Quality of material is not similar as technical guidance, so
company had to
use more material for each product
• Price of material is lower than the budget price, hence the quality
is not
good, so company had to use more material for each product
• Labor skills are not good, hence they waste more material than
 Ex p l an a t i o n s:
G oo d
j o b!
Labour efficiency variances and variable overhead efficiency
variances are
40,800,000 (A) and 30,600,000 (A), in that order. Both items are
related to the
number of hours employees worked. Actually, employees spent
0.6hours on
producing a T-shirt instead of 0.5 hours per T-shirt as budget.
This means that
Spring’s employee worked more hours than budget to produce
required products.
There are several reasons could be mentioned in here:
• Labour’s skill is low, hence they have to spend more hours
than budget to
 PART 2
Based on the information
above about the business
SIMPLIFYING sector and strategy of Spring
Ltd., derive measures in the
POLYNOMIAL Balanced Scorecard of the
S company.
 1. Overview of balanced scorecard
- The balanced scorecard approach: provide management with a set of information
which covers all relevant areas of performance in an objective and unbiased
fashion
- Important features of this approach:
1. It looks at both internal and external matters concerning
the organization
2. It is related to the key elements of a company’s strategy
3. Financial and non-financial measures are linked together
 2. Solution
1. Financial perspective
- Covers traditional measures such as growth, profitability
and shareholder value but set through talking to the
shareholder.

The basic question is: How do we create value for our

shareholders?
 Goals Objectives Measures

Financial - Maximizing profit - ROE

perspective - ROA
- Profit growth rate
- Survive - Net income
- Reduce cost, increase - Cash flow from operations
- Succeed productivity - Revenue growth rate
- Application of machinery in the
- Prosper manufacturing process
- Cost savings from reducing energy use
- Improve efficiency of assets and waste
- Asset turnover ratio
- Operating income change from applying
- Increase domestic sales machinery
- Increase revenue from export - Revenue growth rate from domestic
market markets .
- Revenue growth rate from export markets
 2. CUSTOMER
PERSPECTIVE
- Target: cost, quality, delivery, inspection, handling…
→ The basic question is: What do existing and new customer value from us?
Goals Objectives Measures

Customer
perspective - Increase market share - Contract rate
- Domestic and export market share
- New products - Increase customers - Customer’s satisfaction level about
satisfaction quality of products
- Responsive supply - Customer satisfaction level about
reasonable price
-Preferred supplier - Customer satisfaction level about
attitude of sellers when buying products
-Customer - Customer satisfaction level about
partnership consulting
- Increase customer’s loyalty after-sale services (exchange; return…)
- Number of repeated customers with a
purchase
3. INTERNAL
PERSPECTIVE
- Target: improve internal processes and decision making.

→ The basic question is: What processes must we excel at to achieve our
financial and customer objectives?
 Goals Objectives Measures

Internal
perspective - Input cost control - Purchase price of raw materials,
machinery and equipment,…
- Manufaturing - Material usage
excellence - Labor cost
- Improve the production process - Labour productivity growth rate
- Design - Production capacity ratio
productivity - Rate of product returned
- Rate of broken product
- Time to market - Cost of repair
- Increase the variety of products and - Rate of revenue from new
services products
- Sales stage control - Inventory ratio
- Bad debt ratio
- Efficiently production planning - Complete orders on time
- Cost difference from original
estimate .
 4. INNOVATION AND
LEARNING PERSPECTIVE
- Considers the business’s capacity to maintain its competitive position through
the acquisition of new skills and the development of new products.

→ The basic question is: Can we continue to improve and create future value?
 4. INNOVATION AND
LEARNING PERSPECTIVE
Goals Objectives Measures

Innovation and
learning - Increase the skills of - The ability to make items per
perspective workers hour

- Manufaturing
learning - Focus on the existing - Percentage of existing products
product
- Product focus
- Number of technology machines
- Time to market - Decrease process time to applied to produce 1 item
maturity
 3. Recommendations
● The company needs to train the balanced scorecard implementation team and
key staff. Then, the balanced scorecard implementation team will re-train each
individual in the company.
● Company leaders need to review, adjust, supplement and perfect the balanced
scorecard measurement system every year. The balanced scorecard team is
responsible for guiding and reviewing the balanced scorecard development and
implementation process.
● Managers need to convey to all employees a clear understanding of what
daily work brings to the goals and strategies of the business. In this way, new
employees have actions and jobs in the right direction with the company's
strategy and goals, then use the balanced scorecard to measure the effective
implementation of the new goals and strategies.
Thank You!