Luotang Power
Table of Contents
INTRODUCTION 1 QUANTITATIVE VARIANCE ANALYSIS 2 i.Quantity Variance 5 ii.Price Variance 6 iii.Fuel Efficiency Variance 7 iv.Fuel Cost Variance 8 v.Other Cost Variances 9
5 PORTER FORCES……………………………………………………………………….......11 CONCLUSION 12
INTRODUCTION
Luotang Power was established by American companies who was selected bidders to operate a 600 MW coal-fired power plant project. This company was located in Hubei Province, China. Although this company wholly foreign-owned but they need to use Chinese- manufactured equipment. There are two main issues in this case study. The first issue is the positive performance of Luotang Power does not show in the financial results. Mr. Tan Min Yi was scheduled to make a presentation to the Board of Directors of his parent company, China Hua Tong Power about the results. Mr. Tan Min Yi is a general manager of the Luotang Power Company. He needs to review and investigate the financial results before presenting to the board the disappointing results. The second issue is about the quality of the coal provided by the supplier, Pingdingshan. Sometimes, the Pingdingshan will supply some of the coal with bad quality. They will send some of the coal contain high level of moisture. They need to take time to dry it and will cause additional costs to happen like storage cost.
Mr. Tan wants to use a variance analysis method to better understand plant performance compared to the previous year. So, we will help Mr. Tan to solve this problem by calculating and prepare the recommendations to improve reporting and evaluation of the plant's performance.
QUANTITATIVE VARIANCE ANALYSIS
As what have been introduced before, the Luotang Power CEO has to present the financial report to the board of director. But first he has to understand about the quantitative variance analysis. Variance Analysis is the analysis of performance by means of variances. This tool can be used to promote management action
INTRODUCTION 1 QUANTITATIVE VARIANCE ANALYSIS 2 i.Quantity Variance 5 ii.Price Variance 6 iii.Fuel Efficiency Variance 7 iv.Fuel Cost Variance 8 v.Other Cost Variances 9
5 PORTER FORCES……………………………………………………………………….......11 CONCLUSION 12
INTRODUCTION
Luotang Power was established by American companies who was selected bidders to operate a 600 MW coal-fired power plant project. This company was located in Hubei Province, China. Although this company wholly foreign-owned but they need to use Chinese- manufactured equipment. There are two main issues in this case study. The first issue is the positive performance of Luotang Power does not show in the financial results. Mr. Tan Min Yi was scheduled to make a presentation to the Board of Directors of his parent company, China Hua Tong Power about the results. Mr. Tan Min Yi is a general manager of the Luotang Power Company. He needs to review and investigate the financial results before presenting to the board the disappointing results. The second issue is about the quality of the coal provided by the supplier, Pingdingshan. Sometimes, the Pingdingshan will supply some of the coal with bad quality. They will send some of the coal contain high level of moisture. They need to take time to dry it and will cause additional costs to happen like storage cost.
Mr. Tan wants to use a variance analysis method to better understand plant performance compared to the previous year. So, we will help Mr. Tan to solve this problem by calculating and prepare the recommendations to improve reporting and evaluation of the plant's performance.
QUANTITATIVE VARIANCE ANALYSIS
As what have been introduced before, the Luotang Power CEO has to present the financial report to the board of director. But first he has to understand about the quantitative variance analysis. Variance Analysis is the analysis of performance by means of variances. This tool can be used to promote management action