Bu 610 - Campar Industries, Inc. Unit 5 Annotated Bibliography

Case 21.1 Campar Industries, Inc. Unit 5 Annotated Bibliography

JANET MORENO

Herzing University

Finance and Accounting for Decision Making

BU 610

Dr. Armando Salas-Amaro

October 03, 2017

Case 21.1 Campar Industries, Inc. Unit 5 Annotated Bibliography

In the Case 21.1 Campar Industries, Inc., (Anthony, Hawkins, & Merchant, 2011, p. 645-646) author proposes 4 difference divisions of Campar Industries. Each which its own set of production factor, prices and variance. By doing so the author allows the reader to determine by calculation whether the variance is favorable or unfavorable. At first glance, a reader might just by the profit margin determine success however, taking all other factors such as materials and labor cost into account will determine the detail analysis. There are four major type of variances that can be determined in this case study:   Material, Labor, Overhead and the Sales Variances. (Subho, n.d., para. 1)

To understand how a variance can affect a company we must first understand what they can be. Variances whether favorable or unfavorable are cost that are not planned however can affect the profit of the company. They are cost that are not budgeted and therefore not able to be included. In most cases a variance analysis is conducted to establish what was planned to what the actual cost/profit was for the company. Based on the website Accounting Simplified here are some examples of favorable and un favorable variances:

1.        Increase in the wage rate (adverse labor rate variance);

2.        Decline in the productivity of workforce (adverse labor efficiency variance);

3.        Unanticipated idle time (labor idle time variance);

4.        More wages incurred due to higher production than the budget (favorable sales

            volume variance).

(Definition Variance Analysis, n.d.)

And this is exactly what the author proposes for us to find. In the Alpha Division although it might seem that they would lose profit due to the volume it actuality they made a profit by raising their sale price from $72 per unit to $75.38 a $3.38 difference.

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The author allows the reader to add other variances by each division. Most important classifications within traditional cost accounting are the determination of variable cost and fixed cost, because everything will depend on the perspective and circumstances of the company, variance in the actual budget are of the upmost importance. The author also provides proposed sales volume and profit so the reader can determine how the budget was effected by the variance.

The profit margin of any company consists of the difference between the sales price, and each of the costs necessary to bring that product to market, such as the cost of production, distribution or marketing, among others. In general, the gross margin indicates the profit margin that is capable of generating each product sold alone, independently of the rest of the costs attributed to the company. Similarly, the net profit margin is used to determine the total profit margin attributable to each product sold.