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Chapter 16 - Operational Performance Measurement: Further Analysis of Productivity and Sales
16-49 (continued -1)
3.
MEMO
TO: Rajat Patel, Integrated Medical Care
FROM: Joseph Marin, Marin & Associates
I have calculated the financial partial productivity measure for IMC
for the current and prior year and the supporting documentation is
attached.
Nursing productivity improved by .003882 over the prior year, while
administrative productivity improved by .012823. I attribute this to the
There was a small decline in the pricing component of productivity,
since average wages increased in both nursing and administrative
support; overall, taking both the change in wages and change in hours
into account, the financial productivity of both nursing and administrative
support improved from the prior year.
An important finding is that the financial partial productivity of FMC
compared very well to the industry average, with a current productivity for
nursing at .04168, compared to the industry average of .035. This is a
significant achievement and shows that the management of the FMC
practice in nursing support is in very good shape. In contrast, the
financial partial productivity for the administrative support is below the
16-41
Education.
Chapter 16 - Operational Performance Measurement: Further Analysis of Productivity and Sales
16-49 (continued -2)
Medical practices are under pressure in recent years as Medicare
1. Cross-training employees so that overall staff positions can be reduced
2. Using a larger portion of part-time employees in order to improve the
practice’s flexibility to reduce labor costs when demand patient demand
fluctuates
3. Join with other practices to become multiple-doctor practices. The
multiple-doctor practices are able to utilize facilities and staff more
Source: Katherine Reynolds Lewis, “Medical Practices Work on Ways to
Serve Patients and Bottom Line,” The New York Times, September 8,
2011, p B10.
16-42
Education.
Chapter 16 - Operational Performance Measurement: Further Analysis of Productivity and Sales
16-50 Flexible Budget, Sales Volume, Sales Mix, and Sales Quantity
Variances (40 min)
1.
Summary of Variances, as calculated above in contribution margin
(negative is unfavorable, positive is favorable):
Chapter 16 - Operational Performance Measurement: Further Analysis of Productivity and Sales
16-50 (continued -1)
2.
The reconciliation of the selling price, variable cost, and flexible cost
variances is as follows. The variances are in the solution shown in part 1.
16-44
Education.
Chapter 16 - Operational Performance Measurement: Further Analysis of Productivity and Sales
16-51 Flexible Budget, Sales Volume, Sales Mix, and Sales Quantity
Variances (30 min)
1.
16-45
16.51 (continued -1)
The solution is summarized below, and the calculations are shown above
(a negative is unfavorable and a positive is favorable):
2.
MEMO
TO: Jay Banning, CEO
FROM: I M Student
RE: Banning Inc. Variance Analysis
The following information describes the results of variances
calculated on the attached spreadsheet (see requirement 1) with regard
to what was planned for the past year and the actual results reported.
The firm has a favorable sales volume variance for both T10 and S40
due to increase sales volumes over budget for both products. The total
sales mix variance for T10; the net is a negative overall sales mix
variance.
The flexible budget variance is favorable for both S40 and T10
because T10’s increase in price was greater than its small increase in
16-46
Education.
Chapter 16 - Operational Performance Measurement: Further Analysis of Productivity and Sales
16-52 Sales Volume, Sales Quantity, and Sales Mix Variances (20 min)
Sales Mix
Budget Actual
Flavor Quantity Mix Quantity Mix
Vanilla 240,000 .3000 180,000 .18750
Chocolate 300,000 .3750 270,000 .28125
1. a. Sales Volume Variance
Budgeted Sales
Sales Quantity Contribution Volume
Flavor Actual Budget Difference Margin/Unit Variance
Vanilla 180,000 240,000 60,000 x $0.70 = $ 42,000 U
Chocolate 270,000 300,000 30,000 x $0.90 = 27,000 U
1. b. Sales Mix Variance
Total Budgeted Sales
Sales Mix Actual CM Mix
Flavor Actual Budget Difference Quantity per Unit Variance
Vanilla .18750 .3000 - .11250 x 960,000 x $ .70 = 75,600 U
Chocolate .28125 .3750 - .09375 x 960,000 x $ .90 = 81,000 U
16-52 (continued -1)
16-47
Education.
1. c. Sales Quantity Variance
Budget Budgeted Sales
Sales Mix Sales CM Quantity
Flavor Actual Budget Difference Mix per Unit Variance
Vanilla 960,000 800,000 160,000 x .3000 x $0.70 = $33,600 F
Chocolate 960,000 800,000 160,000 x .3750 x $0.90 = 54,000 F
Recap
Sales Mix Sales Quantity Sales Volume
Flavor Variance Variance Variance
Vanilla $ 75,600 U + $ 33,600 F = $ 42,000 U
Chocolate 81,000 U + 54,000 F = 27,000 U
2. Overall, the firm has enjoyed a good year. The total units sold
substantially exceed the budgeted amount (20%). The increases in
sales could have been a result of the increase of the entire market
size for ice cream and other competing merchandises. In any event,
16-48
Education.
16.52 (continued -2)
The spreadsheet solution for 16-52 is provided below:
Chapter 16 - Operational Performance Measurement: Further Analysis of Productivity and Sales
16-53 Market Size and Market Share Variances (20 min)
1.
Selling price variance: ($.48 - $.52) x 69,120,000 =$2,764,800
U
U
Total market size
Budgeted total market size: 80,000,000 /.05 = 1,600,000,000
Actual market share: 69,120,000 /1,440,000,000 = 0.048
Market share variance:
(0.048 - 0.05) x 1,440,000,000 x $.40 = $1,152,000 U
2. The global risks for an airline include weather events, foreign currency
fluctuations, disruptions in political environments, terrorist activities (as in
the case in this problem), and changes in regulations from country to
CEO.
16-50
Education.
