Revenue and Volume Variance

Polysar CASE Group 3 †¢ Polysar Limited – Established on 1942, Now employed 6,650 people – Structure : Basic Petrochemicals, Rubber, Diversified Products †¢ Rubber Group is Profit Center – Rubber Group produced 46% of Polysar sales Group 3 – 2/13 †¢ NASA – Sarnia 1 Plant : Produce Butyl & HaloButyl > HaloButyl (from 1984) – Sarnia 2 Plant : Produce Butyl (operation 1984) 1) 1984 : 95,000 t 2) 1985 : 65,000 t †¢ EROW – Antwel plant : Produce Butyl & HaloButyl (1964, 1979 modified) 1) 1981 : Prduced Butyl(75%) & HaloButyl(25%) 2) 1985 : Prduced Butyl(50%, 45,000t), HaloButyl(50%, 45,000t) Transfer NASA to ERROW : Butyl(21,000t)Group 3 – 3/13 Q1. The meaning and accuracy of the volume variance. †¢ NASA Rubber Division? Sales Performance(1986) Actual Net sales Revenue 63,239,000 Budget 58,660,000 Deviation 4,579,000 exceed 3,735,000 exceed Gross Margin ? Sales Volume Up 40,945,000 37,210,000 ? Feedstock Cost Down Group 3 – 4/13 †¢ NASA Rubber Division – Net Contribution(1986) Actual Budget Deviation Volume Variance – 11,375,000 -6,125,000 5,250,000 U Gross Profit / NSR 8. 2% 13. 7% -5. 5% Net Contribution – 876,000 2,005,000 -2,881,000 Group 3 – 5/13 †¢ Volume Variance ? Volume Standard Fixed ? Actual Tonnes Produced Variance Cost Per Tonne ? ( + Demonstrated Capacity ) – (? ) – Sarnia 2 (1984) – ? ? NASA to EROW Group 3 – 6/13 Q2. The best sales and production strategy for EROW Division, NASA Division and the Rubber Group in Total. †¢ EROW Division Strategy Transfer Advantage (From NASA) Feedstock – Halobutyl ( )? Group 3 – 7/13 Accurate Budgeting †¢ NASA Division Strategy Volume Variance? NASA? Not Transfer Reach Capacity SARNIA 2? Production Capacity? 95,000? (1984) 65,000(1986)? Group 3 – 8/13 †¢ The Rubber Group Strategy Be a leader in high margin, specialty rubbers Main Strategy , ? 1) Transfer? (Regional Service) 2) 3) ? Group 3 – 9/13 Q3. Management accounting performance system to improve the reporting and evaluation of the Rubber Group performance will be raised. Strategy Group 3 – 10/13 Strategy ? ? Transfer > > Transfer ? Negotiation Price Group 3 – 11/13 †¢ ( ) Strategy SARIN 2 Product Volume Variance N N N Gross Profit / NSR E N Net Contribution E 1986 65,000 t 1987 95,000 t Improve 35,000 t 5,250,000 – 11,375,000 -6,125,000 8. 2% 35. 7% – 876,000 22,661,000 13. 7% 5. 5% 35. 7% 2,005,000 22,661,000 2,881,000 Be a leader in high margin, specialty rubbers Group 3 – 12/13 The End