# Analysis of Divisional Performance of Asian Paints Ltd

Topics: Inventory turnover, Investment, Financial ratios Pages: 7 (1630 words) Published: March 29, 2013
DEPARTMENT OF COMMERCE
SCHOOL OF MANAGEMENT
PONDICHERRY UNIVERSITY

ASSIGNMENT ON ADVANCED COST ACCOUNTING
ANALYSIS OF DIVISIONAL PERFORMANCE OF ASIAN PAINTS LTD

SUBMITTED TO: -SUBMITTED BY: -
DR.G.SHANMUGHASUNDARAM A.PURUSHOTHAMAN
ASSOCIATE PROFESSOR M.COM (BUSINESS FINANCE) DEPT. OF COMMERCE 2nd YEAR
PONDICHERRY UNIVERSITY REG. NUMBER: 11351059

INTRODUCTION

DIVISIONAL PERFOMANCE OF COST CENTRE AND PROFIT CENTRE

A profit centre is a unit of a company that generates revenue in excess of its expenses. The main aim of profit centre is to earn profit. The performance of profit centre is evaluated in terms of whether the centre has been achieved its budgeted profit A cost centre is a business unit that is only responsible for the costs that it incurs. The manager of a cost centre is not responsible for revenue generation or asset usage. The performance of a cost centre is usually evaluated through the comparison of budgeted to actual costs. The costs incurred by a cost centre may be aggregated into a cost pool and allocated to other business units. Investment centre is responsible for both profit and investment. The investment centre manager has control over revenue, expenses and the amount invested in the current assets. The following are the techniques used to measure the divisional performance of cost centre and profit centre * Variance analysis

* Profit
* Return on investment
* Market share

COST PER UNIT:
Cost refers to the total cost incurred for the production. So cost per unit refers to the cost incurred for producing 1 unit. Normally we used the below formula to calculate the cost per unit Cost/unit = total cost / No. of unit produced

COST PER UNIT
year| Production| Total expenses| COST PER UNIT|
2008| 40946.7| 559586| 0.073173203|
2009| 50418.7| 602922| 0.083623918|
2010| 57937.2| 732142| 0.079133829|
2011| 72582.9| 849056| 0.085486587|

Interpretation:
The above table and chart shows the cost per unit of Asian paints India ltd. They incurred highest cost per unit in the year 2011. This may because increasing the cost of raw material or other charges etc. It is better to have lower cost per unit because when cost per unit increases the total cost will increase. That in turn reduces the profitability of a firm. In the 2008 the firms have lower cost per unit of production compared to other years. So may be this year the profit is increased. The cost per unit is higher in the years 2011 and 2009.

COST VARIANCE
Cost variance (CV) is the amount of money that was actually spent on a project or a part of a project compared to the amount of work that was actually accomplished. Cost variance = Budgeted cost of work performed - The actual cost of work performed.

YEAR| TOTAL COST| STANDARD| COST VARIANCE | DECISION| 2008| 40946.7| 61276.54| -20329.84| A|
2009| 50418.7| 61276.54| -10857.84| A|
2010| 57937.2| 61276.54| -3339.34| A|
2011| 72582.9| 61276.54| 11306.36| F|
2012| 84,497.20| 61276.54| 23220.66| F|

Interpretation:
Here from 2008 to 2010 there is a favorable situation because in these years actual cost is less than standard cost. In 2011 and 2012 actual cost exceeds standard cost. That may be because of increase in the cost/unit in these years.

SALES VARIANCE
Sales variance is the difference between actual sales and budget sales. It is used to measure the performance of a sales function, and/or analyze business results to better understand market conditions. Sales variance = Actual sales – standard sales

Segment 1= Paint
YEAR| SALE| STANDARD| SALES VARIANCE| DECISION|
2008| 39062.2| 51731.3| -12669.1| A|
2009| 48641.9| 51731.3| -3089.4| A|
2010| 56135| 51731.3| 4403.7| F|
2011| 63086.1| 51731.3| 11354.8| F|

Segment 2= Others
YEAR| SALE| STANDARD|...

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