Question

Company ABC has recently operated in both Spain and France. Found in 2000, ABC has grown steadily over the years to be one of the largest competitors in the ice cream business.

Exhibit 2 French Region, 2009 Results Variance Profit Plan Volume Euros ('000) ('000) Actual Volume Euros (000) ('000) Sales Data Sales ice-cream (volume in litres) Sales specialties (litres) Revenue from distribution Total Sales 4,010 445 17,879 3,661 4,618 405 20,005 3,377 79 23,461 2,126 (284) 79 1,921 F U F F 4,455 21,540 5,023 Cost of Goods Sold Cost ice-cream Dairy ingredients (litres) Other ingredients (100 gr.) Labor (hours) 2,887 1,844 38.29 7,893 2,841 371 3,317 2,047 43.56 9,142 3,186 438 (1,249) (345) (67) U U 1.121 Cost specialties Dairy ingredients (litres) Other ingredients (100 gr.) Labor (hours) Contribution margin 410 316 40.03 368 298 36.02 1,015 655 106 38 693 388 362 26 8,233 8,663 430 (118) U Other Costs Supervision, energy, maintenance, ... Depreciation Operating margin 2,206 467 5,560 2,324 467 5,872 312F 47 908 510 Selling and Administrative Expenses Delivery expenses Depreciation of trucks Selling expenses Advertising Administrative salaries and expenses Allocated central office expenses Profits before Interest and Taxes 861 507 1,078 1,141 788 1,139 (3) (61) 71 (22) TCCCCC C 158 1,070 810 193 1.242 (35) 1.027 215 Identifiable Assets Cash (average) Accounts Receivable (average) Plant and equipment (net of depreciation € 2,322) Total identifiable assets 580 4,713 5.387 141 634 4,726 5.501 - (47) (54) (13) (114) - Conditions for tourism Average summer temperature 29.8 °C 29.2°C

Analyze one line item in the variable costs of the French division.

Answer 1

We are going to analyse dairy ingredients (litres ) under cost of ice cream in the variable costs of the French division.

As per the the plan

For the sale of 4010 ltrs of ice cream

2887 litres of dairy ingredients are required

Therefore for 1 ltr of ice cream 0.72 litres of dairy ingredients are required.

Per unit cost estimated=7893/2887 =2.73

Actual

For the sale of 4618 ltrs of ice cream

3317 litres of dairy ingredients are required

Therefore for 1 ltr of ice cream 0.72 litres of dairy ingredients are required.

Per unit cost estimated 9142/3317 = 2.76

actual per unit cost of dairy ingredient is more than the amount planned.