Based on the results of the 3 Divisions in 2009, it does not seem to be fair for the current bonus system of sharing 2% of corporate profit evenly among the 3 divisional managers regardless the performance of their division and this triggers Jacques Trumen to rethink about current bonus system.

As all your team members are the senior executive officers in the finance department, you are asked by your CFO, Miss. New Point, to form a team of helping Jacques Trumen to resolve the problem.

Specifically, you are asked to:

A.Perform appropriate variance analysis at a deeper level to help Jacques Trumen, the boss to assess and compare the performance of the Divisional Managers of France and Italy.(Please ignore the Spanish Division as they had a very bad result this year)

B.Make appropriate comments on the results of the analysis.

Further Direction

Miss. New Point also gives your team the following direction:

1.For Italy:perform more in-depth and appropriate variance analysis to explain why actual profits Euro 517 were Euro 58 above budget Euro 459.

2.For France, perform more in-depth variance and appropriate analysis to explain why actual profits Euro 1,242 were Euro 215 above budget Euro 1,027.

3.Once the analysis is performed individually for Italy and France respectively, your team should present one-page summary of comparison of the key numbers for the 2 Divisions for presenting to Jacques Trumen and make appropriate comments.

She also reminds your team to provide any other pertinent information and appropriate comments on the results of the analysis.

As Miss New Point knows all of you are well versed in strategic profitability analysis and variance analysis, she asks you to use the concepts (not exactly the 3 components though) of strategic profitability analysis to perform the variance analysis.Specifically, she asks you to perform the variance analysis on the following two categories from strategic perspective:

I.Competitive Effectiveness

Miss New Point considers the following variance analysis will help to assess the competitive effectiveness. She also reminds you to calculate all variances in terms of contribution margin (except the price variance):

1.Price Variance

2.Sales Mix

3.Mark Share

4.Temperature adjustment (in essence, she said this can be considered as market size variance (or part of))

II.Operating Efficiency (similar to the concept of productivity component in strategic profitability analysis)

She says the focus in this category is on the cost side

For variable costs, Miss New Point reminds your team to work out both the input usage variance and also the input cost variance.

As for the other related costs, just focus on the spending variance.

She also asks you to round your numbers in 4 decimal points in calculation and round your numbers to two decimal points in your final presentation to Jacques Trumen.

In addition, the market had been very tough that year. Unseasonably cold temperatures had driven tourism down (Exhibit 6 shows the history of sales and temperature for the various regions). Over time, Jacques had developed a rule of thumb that a 1"C deviation from the mean summer temperature resulted in a 3% change in volume growth. The 2009 summer temperatures in the coastal zones of Spain had been 1.7'C below average; thus Jacques' rule of thumb predicted volume growth to be only 4.9% rather than the planned 10%. The reaction of a large competitor to lower sales volume had been to lower prices to stimulate demand. Andres had followed with a price cut. Even with total market sales down, Andres decided to keep the level of advertising up to build market share.Profit Plan Actual Variance Profit Plan Actual Variance Volume Euros Volume Euros Volume Euros Volume Euros "000) (ooo) "DDD) 1000 "OOO) ('000 ('DDD) Sales Data Sales Data 4,010 17,879 4,618 20,005 2,126 Sales ice-cream (volume in litres) 2,453 10,967 2,480 11,106 139 Sales ice-cream (volume in litres) Sales specialties (litres) 445 3,661 21 405 3,377 (284) nn CT Sales specialties (litres) 272 2.232 276 2,253 Total Sales 2,725 13,199 2,756 13,359 160 n TIT Revenue from distribution 79 79 Total Sales 4.455 21,540 5,023 23,461 1,921 Cost of Goods Sold Cost of Goods Sold Cost ice-cream Dairy ingredients (litres) 1,864 4,963 1,895 4,986 (23) Cost ice-cream U Dairy ingredients (litres) 2,887 7.893 3,317 9,142 (1,249) CCC Other ingredients (100 gr.) 1,275 1,885 1,296 1,932 (47) Other ingredients (100 gr.) 1.844 2,841 2.047 3,186 (345) Labor (hours) 33.10 300 36.03 328 (28) Labor (hours) 38.29 371 43.56 438 (67) Cost specialties 689 257 676 13 F Cost specialties Dairy ingredients (litres) 259 Dairy ingredients (litres) 410 1,121 368 1,015 106 F Other ingredients (100 gr.) 196 425 197 430 (5) U F Other ingredients (100 gr.) 316 693 298 655 38 F Labor (hours) 24.24 220 23.29 212 8 Labor (hours 40.03 388 36.02 362 26 1 7 7 Contribution margin 4,717 4,795 78 Contribution margin 3,233 3,663 430 Other Costs Supervision, energy, maintenance, ... 1,142 1,135 F Other Costs Supervision, energy, maintenance, ... 2.206 2,324 (118) Depreciation 109 109 85 F Depreciation 467 467 Operating margin 3,466 3,551 Operating margin 5.560 5,872 312 F Selling and Administrative Expenses Delivery expenses 329 315 14 F Selling and Administrative Expenses Delivery expenses 861 908 (47) Depreciation of trucks 198 198 U Depreciation of trucks 507 510 (3) U U Selling expenses 314 344 (30) U 40 F Selling expenses 1,078 1,139 (61) U Advertising 1.328 1,288 1,141 574 Advertising 1,070 71 Administrative salaries and expenses 558 (16) Administrative salaries and expenses 788 810 (22) Rent 122 122 158 193 (35) Allocated central office expenses (35) Allocated central office expenses 158 193 Profits before Interest and Taxes 1.027 1,242 215 F Profits before Interest and Taxes 459 517 58 Identifiable Assets Identifiable Assets 94 108 (14) Cash (average 94 141 (47) Cash (average) 357 Accounts Receivable (average) 580 634 (54) Accounts Receivable (average) 377 20 Plant and equipment (net of depreciation ( 2,322) 4.713 4.726 (13) Plant and equipment (net of depreciation ( 3,200) 2.763 2.764 (1) Total identifiable assets 5.387 5.501 (114) Total identifiable assets 3.234 3,229 Conditions for tourism Conditions for tourism Average summer temperature 29.8 *C 29.2* C Average summer temperature 29.7' C 29.8" C