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Nature's Touch Performance Report July 2012

Please find the attached performance report and write a two to three paragraph analyzing the report.

Need to explain:

Actual vs budget
Variable cost
Division profit
Contribution margin

Nature's Touch
Performance Report
For the Month of July 2012
Half Year Budgeted Half Year Actual Actual vs Budget
Units $/Unit Units $/Unit
1,150,181 6.29 900,000 5.90
Sales 7,234,638 5,310,000 (1,924,638)

Variable Costs: Materials 902,892 0.785 783,000 0.87 119,892
Labor & Overhead 902,892 0.785 720,000 0.80 182,892
Packaging 80,513 0.070 72,000 0.08 8,513
Sales Commission 460,072 0.400 360,000 0.40 100,072
Total Variable Costs 2,346,369 2.040 1,935,000 2.15 411,369

Contribution Margin $ 4,888,269 4.25 3,375,000 3.75 (1,513,269)
% 67.6% 67.6% 63.6% 63.6%

Advertising and Publicity:
TV 1,243,039 1,243,039
Print Ad: Magazine 1,864,559 1,864,559
Online Marketing 621,519 621,519
Hospital Care Package 621,519 621,519
Samples 621,519 621,519
Coupons 1,243,039 1,243,039
Total Advertising and Publicity 6,215,194 6,215,194
86% 117%
In-Pocket Contribution
$ (1,326,925) (2,840,194) (1,513,269)
%

Direct Fixed Costs:
Division Management 889,984 889,984 -

Division Profit (2,216,909) (3,730,178) (1,513,269)

Attachments

Solution Preview

Performance of Nature's Touch
For the Month of July 2012

The performance of Nature's Touch is below budget by a substantial amount, $1,513,269. Although the original report you reviewed seems to show that sales and expenses were both way below budget, this is a bit misleading. Almost all of the variance from budget is due to sales volume differences with smaller amount of variance from sales price below budget and an even smaller portion to cost overruns.

Sales Activity Variance

When sales volume is below plan, the variable costs should all be below plan in direct proportion to the volume change. I have updated the half year budget (static budget) to be a flexible budget. See attached in Excel colored in green where the budget is now computed using the exact variable cost per ...

Solution Summary

Your tutorial is 427 words plus a flexible budget report in Excel (attached) giving a revised view and showing the five sources of variance and explaining the two large sources of variance. Comments are given to explain why the initial report is misleading.

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