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.