# Variance Analysis - Compagnie Essay

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1. What is your evaluation of each of the three businesses? What is your evaluation of the managers who run them? French Division Units  ('000) Profit Plan (Master Budget)  Profit before Interest and Taxes = 1027 Flexible Budget  Profit before Interest and Taxes = 2,002 But Actual Profit earned = 1242 which is 760 less than profit anticipated in flexible budget. Increase in the profits above the actual budget can be attributed to 20% increase in sales in 2009. Although Jean’s profits were above the actual budget, French Division’s earnings were much lower than what it could have been, had they budgeted for the actual volume of sales that they ended up selling. We can partly attribute this decrease in earnings to the fact…show more content…
He was faced with two prominently unfavorable situations: 1) The average summer temperature was 1.7 degree Celsius lower than anticipated. According to case we can attribute 5.1% decrease in sales due to this climatic condition over which Andres had no control. Also, he was forced to cut his price to remain competitive. 2) Andres was forced to import product from French division as he ran out of capacity several times due to new machines performing inadequately. This added an overhead expense of approximately 2147 (Additional maintenance costs + Transfer costs) Italian Division Units  ('000) Profit Plan (Master Budget)  Profit before Interest and Taxes = 459 Flexible Budget  Profit before Interest and Taxes = 514 But Actual Profit earned = 517 which is almost equal to the profit anticipated in flexible budget. Please refer to a detailed variance analysis below (in Question 2) for Italian Division. From the variance analysis, we reckon that more labor was required for the manufacturing of Ice Cream. But we can attribute this to the fact that the machines used in Italy had been moved from France when the new equipment was installed in France. The old machines were partly the reason for the lower efficiency. But, the Italian manager had