Budget comparative Analysis-70744

Answer No 2

Question 2 (iii)

1. Price being the significant factor for which the consumers are shifting from Teasermalt to Chockoball reduction in price by $ 0.4 Teasermalt will gain the better market share thus the sales volume will increase by 25%. Though the company has managed to get savings in prime cost but this saving could not cover up the losses due to reduction in price thus the organization has to suffer loss of $ 0.4030 per unit sold. Despite increase in volume of sales the product could not achieve the target ROTA of 25%. Thus the strategies introduced by the company are not worthy enough to reach the target of 25% return on total assets.
2. In the Second part of the question where the cost structure of the Chockoball is given the decreased market share has hurt the profitability of the company as the fixed cost in the logistics is intact at $ 35,100,000 which cannot be compensate with the sales decreased. The reduced profitability will gain the teasermalt a better market and will help the product gain consumers. The non shifting of the consumers will let the teasermalt survive the market. 75% decrease in the market will hurt the chockoball market share to a great extent. In future it might be so where teaser,malt will make the chockoball extinct from the market.
3. The company should not go with the recommended changes since it is suffering losses due to this. However by this changes company may extinct its competition of chockoball but in that process company will have to suffer huge losses. The company can go with the recommendations only along with some additional strategic actions such as reducing the supermarket retail margins or increasing the supermarket rebates. Such strategies will increase the net sale value of the company thus reducing the losses and converting it to profits for the company.

Answer No 3

To The management

It can be seen that the management was not able to complete the demand of the company using its production capacity and its the reason for the slow growth of the company in the recent years and hence the changes in the production capacity would be helpful for the company and hence the demand could be met but as this would also lead to the increase in the costs of the company as the fixed overheads and hence the same should be feasible by the analysis performed of the company.

The analysis performed could be analyzed as the company would be better off if the company selects the option to extend the 30% of the production line which would ensure profitability of the company and help the company to recover the investment by the increase of the profit margins of the company. Hence this would be profitable or the company to enhance the productive capacity by 30% and it would help the company to increase by 23.45 million dollars for the company.

The other issues that would be considered by the manager are the various strategic changes that it to do with management of the various resources that are increasing with the time and thus would be a major drawback before any decision can be made by the company on the extension of the project.

Answer 4

This allocation is important as this wil only help the management accountants to appropriate costs to the various departments that produce goods and then these can be divided to various costs of the goods that would be the main objective of the process. The analsyis is important to understand the best method under which the goods can be allocated in the various ratios to the different items and

Answer 5

The major line of difference between the actual costing and normal costing are the way in which the costs are allocated to the various products and services and the manner in which they are calculated. The normal cost of the product consists of the direct materials costs of the products, direct labour and the standard overheads costs calculated at a predetermined overheads for the products based on the hours or machine time etc. In the case of actual costing the total costs consist of the actual materials costs of the goods, labour charge of the goods and the overheads are calculated using the allocation method such as actual labour hours or machine hours of the system. Hence the best possible task is to allocate it on actual and hence the actual method is more realistic than the normal costing method of costing.  (SUNILKUMAR, 2012)

Answer 6

To The Managing director

The decision of production is mainly based on the concept that what would be the correct product that   would bring maximum profits for the enterprise and that would help the management to make the decision correctly. In the given case that the tradition methods that was followed and had helped the management to go for eco products proved to be wrong when actual decision was taken by the ABC method and it seemed that the profits are more in the normal ones as the overheads are mostly consumed by the eco divisions and this model would be not a profitable product as the analysis indicates. It means that the wrong recovery of the overheads to the other product is the reason for the incorrect decision and hence should be thought strategically and decided upon and hence the costs allocations can change decisions to the great extent.