We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

Boston Creamery Paper

Words: 1698, Paragraphs: 12, Pages: 6

Paper type: Essay , Subject: Economy

This essay sample on Boston Creamery provides all necessary basic info on this matter, including the most common “for and against” arguments. Below are the introduction, body and conclusion parts of this essay.

RECOMMENDATIONS Management needs to determine which costs can be controlled and which costs cannot be controlled. The variance analysis simply showed that there was an unfavorable variance for manufacturing (99,000 U). Manufacturing Cost of Goods Sold must be evaluated individually because of the underlying facets from just a number. This unfavorable number could be caused by either an increase in price or a waste in using the number of unit materials. The materials variance should be broken down into the price variance and the usage variance. Exhibit 1 shows that variable cost and fixed cost were separated and variance was computed.

Variable cost was the main culprit of the increase in cost. Here, we can identify that the increase may mainly be due to the price variance of milk and sugar. Cooperation between John Vance, the corporate controller and Frank Roberts in preparing the variance analysis must exist. Figures to be provided will be free from bias and management can easily detect areas that need to be addressed immediately. Management will obviously not be interested in going through the whole variance analysis process. They can highlight areas which are to be addressed urgently.

Don't use plagiarized sources. Get Your Custom Essay on Boston Creamery
Just from $13,9/Page

Get Essay

As per the case, they only wish to see the items that need their concern so that action can be taken the next year, 1974. Boston Creamery must increase advertisements of their products to address the increase in market size. Boston Creamery, Inc. lost 1. 0% market share – from 50% to only 49%, despite the favorable increase in market size variance of $ 167,610. 00 (See Exhibit 2). This was highlighted from the unfavorable result of $ 55,266. 00 of market share variance. This means that the increase in market share did not benefit the Company, and the increase in sales was mainly due to the increase in the price of their products.

Unfavorable Variance

Company must probe on the competitors, looking into how they were able to gain the increase in market share. For example, if competitors were able to provide better ice cream or were aggressive in advertising their products as opposed to Boston Creamery. The Company must be able to increase advertising efforts and evaluate means to gain the increase in market share. Management must provide a more comprehensive sales mix, breaking down each sales to clearly see which ice cream flavors are selling or not.

Use of sales mix variance compares the actual mix sales to the forecasted; we can easily analyze which items have higher profit than the other. As a result, Boston Creamery may want to re-evaluate the contribution margin for the items which are unfavorable. Introducing new flavors which may sell better, or change in selling price, can be done in order to sell the product. Looking at Exhibit 3, we can see that despite the favorable outcome of the sales quantity, this did not translate to a favorable sales mix. This can be attributed to the loss of popularity of the basic flavors (e. g. vanilla and chocolate). BASES FOR RECOMMENDATION

One of the factors that contributed to the unfavorable variance in manufacturing cost of goods sold is the increase in labor- cartonizing and freezing (increase of $34,400). Carton handling workers sort daily production each day onto pallets grouped by delivery truck, based on the next day’s sales orders. As stated in the case, the change in the truck loading system lowers cost of factory labor in exchange of a higher cost driver labor for loading the trucks and also frees up some driver time each day. Also, the greater part of the variable unfavorable variance is due to milk and sugar price variances ($57,300 and $23,400 respectively).

This should not be held against the manager; rather, it should have been adjusted in the budget. Looking into the items on the schedule for manufacturing cost of goods sold, the uncontrollable costs were Milk and Sugar. A professional relationship can exist between John Vance and Frank Roberts, wherein they can benefit from one another. The fluctuating costs of sugar and milk might not be subject to control by Boston Creamery if the suppliers or even the market raises the price. Modification can be made when purchasing raw materials, such as buying in high volume and supplier will lower prices per unit.

The fixed costs of sales salaries could be controlled by increasing or decreasing the size of the sales force. They need to explore economies of scale, engineering processes, product mix, and so forth. The controllers’ report of sales variance analysis will be more interesting with the help of Frank Roberts; or else the technicality of the computation may affect the management decision – report too boring. Market size increased from the forecasted market of 11,440,000 to 12,180,000 (actual), but was not translated equally to the market share for Boston Creamery.

The actual size increased by more than 6%, however, Boston Creamery’s actual market share decreased by 1%. Problem with the forecast was that the Company was complacent on using the same estimate of 1972 actual gallon sales. As stated in the case, 1973 budgeted share was done in October of 1972, since final figure was not available yet. Though sales volume increased from 5,720,329 gallons budgeted to 5,968,000 gallons actual, it did not serve the company well. Boston Creamery must conduct a more accurate market research.

Frank Roberts is asked by Jim Peterson to make a short presentation at the next management meeting commenting on the major reasons for the favorable operating income variance of $71,700; problem arises from the operating income variance as it does not show the breakdown of each product the company is selling. Based on the result of the sales mix variance analysis, the management could see the effect of change in the number of units sold from the number of units budgeted to be sold. Company must understand the seasonality of each product and proposed other alternatives to forecast sales, such as a more comprehensive market research.

Exhibit 1. Manufacturing Cost of Goods Sold |  |Actual |Flexible Budget |Variance | |Variable Costs | |  |  |  | | Dairy Ingredients | 3,679,900. 00 | 3,648,500. 00 | 31,400. 00 |U | | Milk price variance | 57,300. 00 | | 57,300. 0 |U | | | |- | | | | Sugar | 599,900. 00 | 596,800. 00 | 3,100. 00 |U | | Sugar price variance | 23,400. 00 | | 23,400. 00 |U | | | |- | | | | Flavoring (Including fruits and nuts) | 946,800. 0 | 982,100. 00 | (35,300. 00) |F | | Cartons | 567,200. 00 | 566,900. 00 | 300. 00 |U | | Plastic wrap | 28,700. 00 | 29,800. 00 | (1,100. 00) |F | | Additives | 235,000. 00 | 251,000. 00 | (16,000. 0) |F | | Supplies | 31,000. 00 | 35,000. 00 | (4,000. 00) |F | | Miscellaneous | 3,000. 00 | 3,000. 00 | |  | | | | |- | | | Subtotal | 6,172,200. 0 | 6,113,100. 00 | 59,100. 00 |U | |Fixed Costs |  |  |  |  | | Labor – cartonizing and freezing | 425,200. 00 | 390,800. 00 | 34,400. 00 |U | | Labor – other | 41,800. 00 | 46,000. 00 | (4,200. 0) |F | | Repairs | 32,200. 00 | 25,000. 00 | 7,200. 00 |U | | Depreciation | 81,000. 00 | 81,000. 00 | |  | | | | |- | | | Electricity and water | 41,500. 00 | 40,000. 0 | 1,500. 00 |U | | Spoilage | 31,000. 00 | 30,000. 00 | 1,000. 00 |U | | Subtotal | 652,700. 00 | 612,800. 00 | 39,900. 00 |U | |Total | 6,824,900. 00 | 6,725,900. 00 | 99,000. 00 |U | Exhibit 2. Market Share and Market Size Variance Actual market size | 12,180,000 |  | | | | |Budgeted market size | 11,440,000 |  | | | | |Actual market share |49% |  | | | | |Budget market share |50% |  | | | | |Actual sales | 5,968,000. 00 |  | | | | |Budgeted sales | 5,720,329. 00 |  | | | | |Budgeted contribution margin per unit|0. 530 |  | | | | |  |  |  |  |  |  | |Market share variance = |Actual market size in units x |x |(Actual market share – budgeted |x |Budgeted contribution margin | | | | |market share) | |per unit | |  | (55,266. 00) |U |  |  |  | |Market size variance = |(Actual market size – budgeted |x Budget market share |x |Budgeted contribution margin | | |market size) | | | |per unit | |  | 167,610. 00 |F |  |  |  | Exhibit 3. Sales Mix and Sales Volume Variance |Actual Sales |Forecasted Sales |Actual Sales Mix |Forecasted Sales Mix |Standard Contribution Margin |Sales Mix Variance |Sales Quantity Variance | |Vanilla | 2,458,212. 00 | 2,409,854. 00 |0. 4119 |0. 4213 |0. 4329 | (24,300. 74) |U | 45,234. 92 |F | |Chocolate | 2,018,525. 00 | 2,009,061. 00 |0. 3382 |0. 3512 |0. 4535 | (35,214. 33) |U | 39,506. 26 |F | |Walnut | 50,124. 00 | 48,883. 00 |0. 0084 |0. 0085 |0. 5713 | (501. 4) |U | 1,210. 93 |F | |Buttercrunch | 268,839. 00 | 262,185. 00 |0. 0450 |0. 0458 |0. 4771 | (2,249. 29) |U | 5,423. 91 |F | |Cherry Swirl | 261,240. 00 | 204,774. 00 |0. 0438 |0. 0358 |0. 5153 | 24,521. 52 |F | 4,575. 41 |F | |Strawberry | 747,049. 00 | 628,560. 00 |0. 1252 |0. 1099 |0. 4683 | 42,725. 00 |F | 12,763. 40 |F | |Pecan Chip | 164,377. 00 | 157,012. 00 |0. 0275 |0. 0274 |0. 5359 | 298. 42 |F | 3,648. 48 |F | |Total | 5,968,366. 00 | 5,720,329. 00 |1. 0000 |1. 0000 |0. 4539 | 5,278. 64 |F | 112,363. 30 |F | |

Boston Creamery

About the author

This academic paper is crafted by Mia. She is a nursing student studying at the University of New Hampshire. All the content of this sample reflects her knowledge and personal opinion on Boston Creamery and can be used only as a source of ideas for writing.

Check out more works by Mia:

How to cite this page

Choose cite format:

Boston Creamery. (2019, Dec 07). Retrieved from https://paperap.com/paper-on-boston-creamery-181/

Is Your Deadline Too Short?
Let Professionals Help You

Get Help

Our customer support team is available Monday-Friday 9am-5pm EST. If you contact us after hours, we'll get back to you in 24 hours or less.

By clicking "Send Message", you agree to our terms of service and privacy policy. We'll occasionally send you account related and promo emails.
No results found for “ image
Try Our service

Hi, I am Colleen from Paperap.

Hi there, would you like to get such a paper? How about receiving a customized one? Click to learn more https://goo.gl/CYf83b