Case 10 2 Solartronics Inc
Opleiding: Bedrijfseconomie jaar 3; periode 9
Naam: Kerensa Wong
Student nummer: 505390
Docent: Mevr. Wendy Ramautarsingh
Datum: 20-01-2015
1) Why are the reported results for January so poor, particularly in light of the expected, average monthly profit of $30,000?
The income statement for January shows that the firm reports a loss $8,400. It is so poor if compared with the expected monthly profit of $30,000 ($ 360,000/12). The main reason is related to the sales. If the budgeted sales for the year are $3,000,000, the expected sales for each month are $250,000 (3,000,000/12). From the case, the actual sales for January are only $165,000. The sales had been down, primarily due to the normal seasonal downturn. Since there is a lower level of production than expected, there must be variances in the operating costs, mainly from the fixed factory overhead—volume, that are unfavorable. During this period, fixed costs also continued to be high which meant that the total allocation of the fixed costs was not spread over a large scale.
2) What additional data would be useful in analyzing the firm’s January performance? Why?
In analyzing the firm’s January performance, there should be additional data.
Some of these factors include: changes in the general level of economic activity and the effects that these changes have on the volume of sale. Various external forces could help the company analyze the January performance.
Any changes in the labor rates could help the company analyze the performance.
Changes in internal policies like production costs by management could also be of some help.
Determining the variances and percent changes in expenses also could be a useful analysis for January’s performance. The company should consider using a balanced scorecard as a way to align their performance with their strategic goals.
Naam: Kerensa Wong
Student nummer: 505390
Docent: Mevr. Wendy Ramautarsingh
Datum: 20-01-2015
1) Why are the reported results for January so poor, particularly in light of the expected, average monthly profit of $30,000?
The income statement for January shows that the firm reports a loss $8,400. It is so poor if compared with the expected monthly profit of $30,000 ($ 360,000/12). The main reason is related to the sales. If the budgeted sales for the year are $3,000,000, the expected sales for each month are $250,000 (3,000,000/12). From the case, the actual sales for January are only $165,000. The sales had been down, primarily due to the normal seasonal downturn. Since there is a lower level of production than expected, there must be variances in the operating costs, mainly from the fixed factory overhead—volume, that are unfavorable. During this period, fixed costs also continued to be high which meant that the total allocation of the fixed costs was not spread over a large scale.
2) What additional data would be useful in analyzing the firm’s January performance? Why?
In analyzing the firm’s January performance, there should be additional data.
Some of these factors include: changes in the general level of economic activity and the effects that these changes have on the volume of sale. Various external forces could help the company analyze the January performance.
Any changes in the labor rates could help the company analyze the performance.
Changes in internal policies like production costs by management could also be of some help.
Determining the variances and percent changes in expenses also could be a useful analysis for January’s performance. The company should consider using a balanced scorecard as a way to align their performance with their strategic goals.