Luotang Power

3225 WordsMar 30, 201313 Pages
Table of Contents INTRODUCTION 1 QUANTITATIVE VARIANCE ANALYSIS 2 i.Quantity Variance 5 ii.Price Variance 6 iii.Fuel Efficiency Variance 7 iv.Fuel Cost Variance 8 v.Other Cost Variances 9 5 PORTER FORCES……………………………………………………………………….......11 CONCLUSION 12 INTRODUCTION Luotang Power was established by American companies who was selected bidders to operate a 600 MW coal-fired power plant project. This company was located in Hubei Province, China. Although this company wholly foreign-owned but they need to use Chinese- manufactured equipment. There are two main issues in this case study. The first issue is the positive performance of Luotang Power does not show in the financial results. Mr. Tan Min Yi was scheduled…show more content…
ii. Price Variance The definition of price variance is the difference between the actual and standard prices of one product unit multiplied by how much input was used. The formula is: Price Variance = (Actual Price - Standard Price) X Actual Quantity The price variance can be used by a business to assess the change between expected and actual input prices, since a positive price variance reflects an unfavorable cost rise, while a negative result indicates a favorable cost decrease. To adapt price variance to the type of business Luotang power it’s based upon the average price that electricity was sold to HPPC. The formula is: (Price per MWh in Current Year-Price per MWh in Prior Year) * Net Generation in Current Year From our calculation in price variance for Loutang Power we get amount RMB 6,511,9669. Since the amount is positive, that’s mean it unfavorable. Unfavorable show that Loutang Power unefficiency in managing its price and cost. We can see that demand from clients in 2010 is higher than others years because in 2010 the price is lowest. In 2009 is the highest price than its effect the demands. General Manager increases a little bit price in 2011, so the demand is decreased dramatically. This may also be caused by HPPC had its own electricity generating and produce themselves the

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