Boston Creamery
RECOMMENDATIONS
Management needs to determine which costs can be controlled and which costs cannot be controlled. The variance analysis simply showed that there was an unfavorable variance for manufacturing (99,000 U). Manufacturing Cost of Goods Sold must be evaluated individually because of the underlying facets from just a number. This unfavorable number could be caused by either an increase in price or a waste in using the number of unit materials. The materials variance should be broken down into the price variance and the usage variance. Exhibit 1 shows that variable cost and fixed cost were separated and variance was computed. Variable cost was the main culprit of the increase in cost. Here, we can identify that the increase may mainly be due to the price variance of milk and sugar.
Cooperation between John Vance, the corporate controller and Frank Roberts in preparing the variance analysis must exist. Figures to be provided will be free from bias and management can easily detect areas that need to be addressed immediately. Management will obviously not be interested in going through the whole variance analysis process. They can highlight areas which are to be addressed urgently. As per the case, they only wish to see the items that need their concern so that action can be taken the next year, 1974.
Boston Creamery must increase advertisements of their products to address the increase in market size. Boston Creamery, Inc. lost 1.0% market share – from 50% to only 49%, despite the favorable increase in market size variance of $ 167,610.00 (See Exhibit 2). This was highlighted from the unfavorable result of $ 55,266.00 of market share variance. This means that the increase in market share did not benefit the Company, and the increase in sales was mainly due to the increase in the price of their products. Company must probe on the competitors, looking into how they were able to gain the increase in market share. For example, if competitors were able to
Management needs to determine which costs can be controlled and which costs cannot be controlled. The variance analysis simply showed that there was an unfavorable variance for manufacturing (99,000 U). Manufacturing Cost of Goods Sold must be evaluated individually because of the underlying facets from just a number. This unfavorable number could be caused by either an increase in price or a waste in using the number of unit materials. The materials variance should be broken down into the price variance and the usage variance. Exhibit 1 shows that variable cost and fixed cost were separated and variance was computed. Variable cost was the main culprit of the increase in cost. Here, we can identify that the increase may mainly be due to the price variance of milk and sugar.
Cooperation between John Vance, the corporate controller and Frank Roberts in preparing the variance analysis must exist. Figures to be provided will be free from bias and management can easily detect areas that need to be addressed immediately. Management will obviously not be interested in going through the whole variance analysis process. They can highlight areas which are to be addressed urgently. As per the case, they only wish to see the items that need their concern so that action can be taken the next year, 1974.
Boston Creamery must increase advertisements of their products to address the increase in market size. Boston Creamery, Inc. lost 1.0% market share – from 50% to only 49%, despite the favorable increase in market size variance of $ 167,610.00 (See Exhibit 2). This was highlighted from the unfavorable result of $ 55,266.00 of market share variance. This means that the increase in market share did not benefit the Company, and the increase in sales was mainly due to the increase in the price of their products. Company must probe on the competitors, looking into how they were able to gain the increase in market share. For example, if competitors were able to