Project 1

Preliminary analysis

The sales and manufacturing cost derived in sales and variables selling and administrative analysis depicts that the sales have reduced from the year 20X2 to 20X4. Interpretation provides analysis that, however, the sales have gone down in the year 20X4, the cost of goods sold has increased in contrast to the percentage of revenue, from 66% in 2012 to 75% in 20X4, making less gross margins for the organization.

As the profit for the fiscal year 20X4 hasdecreased prior to the year, it has made the management team quite disappointed regarding the financials showing decreasing trend. The President wasmost likely arguing the fact that financials of the company were kept increasing year by year, but in 20X4, it declined. He argued againstwhy the sales were declined when the organization is providing high and exceptional quality product to its customers.Withquite effective communication, he concerned the fact that cost must be minimized and they must diversify the product. Points of concern for the organization relate to the manufacturing and materials cost which has increased to 75% of the revenues being generated for the organization in 20X4, this has increased without increase in the Sales Price or Volume. One of the main differences and a problem for the organization relates to the high difference in variances between budgeted and actual cost, this suggests that the budget is not being created in contrast to the actual demands and issues are pertaining in the organizational environment.

The perception of theoperationsmanager is dissimilar to the President in the way that he has argued that the quality of products is good enough, the declining sales cannot be offsetuntil and unless the budget for 20X5can be increased in order to align with the increased cost.The high budget forvariable and manufacturing overhead would most probably accommodate the quality issues.

Management Accounting Harvard Case Solution & Analysis

The analysis of budget and actual sales shows that the budgeted sales are lower than actual sales, even though the selling price is same for both actual and budgeted year, i.e.$96.60, so the expected number of sales in 20X5 might be lower. This is favorable for the company to have high actual sales than budgeted sales. Also the budgeted variable and administrative cost, but the variance between high budgeted variable and administrative cost than actual cost is unfavorable.

The changes in the cost of goods sold is greater than 4%, which means that the direct cost attributed to the manufacturing or production of pair of boots sold in a company increases from 20X2 to 20X4. The trend of the actual selling and administrative cost is increasing as the amount of sales is also increasing. The variable overhead cost is increasing as the output is also increasing.

The sales variance between actual and budgeted sales in fiscal year 20X4is being decreased because the actual sales of the pair of boots were being lower than budgeted sales.The sales price variance is unfavorablefrom 20X2 to 20X4, as the actual price of boot pair is less than budgeted price per boot pair.The management can take a closer look over this trend of the sales price and sales variance in order to make better decision to increase price of boot such as the management..............

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