Question for Accounting Internal Decision Making

Assignment 3: Case –

Compagnie du Froid, S.A.

Download xls file:Compagnie du Froid, S.A.
Please answer the following for this case:
What is your evaluation of each of the three businesses? What is your evaluation of the managers who run them?
Try to break out the strategic profitability variances for (at least) one of the businesses. The Italian division is probably the most straight-forward of the three. Please do a full variance analysis for this division.

Compagnie du Froid, S.A.
Harvard Business School Case #197085
Case Software #XLS104
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Ex 1 – Profit plan assumptions
Spain
Standards
Percentage of volume from specialties
10%
Selling Prices (in Euros)
Ice-cream Price (per litre)
Specialties Price (per litre)
4.42
8.13
Manufacturing Costs
Dairy (per litre)
Other ingredients ice-cream (sugar, flavor, etc., per 100 grams)
Other ingredients specialties (sugar, flavor, etc., per 100 grams)
Labor (wage per hour)
Labor hours ice-cream (litres per hour)
Labor hours specialties (litres per hour)
Volume
Dairy ingredients—ice-cream (% of volume)
Other ingredients—ice-cream (grams per litre)
Dairy ingredients—specialties (% of volume)
Other ingredients—specialties (grams per litre)
2.61
1.51
2.12
8.13
107.20
11.04
72%
48
93%
73
Ex 2 – France Performance
France
Volume
(in ‘000)
Sales Data
Sales ice-cream (volume in litres)
Sales specialties (litres)
Sales from frozen food
Total Sales
Cost of Goods Sold
Cost ice-cream
Dairy ingredients (litres)
Other ingredients (100 gr.)
Labor (hours)
Cost specialties
Dairy ingredients (litres)
Other ingredients (100 gr.)
Labor (hours)
Contribution margin
Profit Plan
Euros
(in ‘000)
4,010
445 10%
4,455
17,879
3,661
21,540
2,887
1,844
38.29
410
316
40.03
Actual
Volume
(‘000)
4,618
405
Variance
Euros
(‘000)
5,023
20,005
3,377
79
23,461
2,126 F
(284) U
79 F
1,921 F
7,893
2,841
371
3,317
2,047
43.56
9,142
3,186
438
(1,249) U
(345) U
(67) U
1,121
693
388
8,233
368
298
36.02
1,015
655
362
8,663
106 F
38 F
26 F
430 F
Other costs
Supervision, energy, maintenance, …
Depreciation
Operating margin
2,206
467
5,560
2,324
467
5,872
(118) U
312 F
Selling and Administrative Expenses
Delivery expenses
Depreciation of trucks
Selling expenses
Advertising
Administrative salaries and expenses
Allocated central office expenses
Profits Before Interest and Taxes
861
507
1,078
1,141
788
158
1,027
908
510
1,139
1,070
810
193
1,242
(47) U
(3) U
(61) U
71 F
(22) U
(35) U
215 F
Identifiable Assets
Cash (average)
Accounts receivable (average)
Plant and equipment (net of depreciation € 2,322)
Total Identifiable Assets
94
580
4,713
5,387
141
634
4,726
5,501
(47)
(54)
(13)
(114)
Conditions for tourism
Average summer temperature
Expected growth
ROI
29.8
29.2
9%
19.1%
22.6%
Ex 3 – Italy Performance
Italy
Profit Plan
Volume
Euros
(‘000)
(‘000)
Actual
Volume
(‘000)
Variance
Euros
(‘000)
Sales Data
Sales ice-cream (volume in litres)
Sales specialties (litres)
Total Sales
2,453
272
2,725
10,967
2,232
13,199
2,480
276
2,756
11,106
2,253
13,359
139 F
21 F
160 F
Cost of Goods Sold
Cost ice-cream
Dairy ingredients (litres)
Other Ingredients (100 gr.)
Labor (hours)
1,864
1,275
33.10
4,963
1,885
300
1,895
1,296
36.03
4,986
1,932
328
(23) U
(47) U
(28) U
259
196
24.24
689
425
220
4,717
257
197
23.29
676
430
212
4,795
13 F
(5) U
8 F
78 F
Cost specialties
Dairy ingredients (litres)
Other Ingredients (100 gr.)
Labor (hours)
Contribution margin
Other costs
Supervision, energy, maintenance, …
Depreciation
Operating margin
1,142
109
3,466
1,135
109
3,551
7 F
85 F
Selling and Administrative Expenses
Delivery expenses
Depreciation of trucks
Selling expenses
Advertising
Administrative salaries and expenses
Rent
Allocated central office expenses
Profits Before Interest and Taxes
329
198
314
1,328
558
122
158
459
315
198
344
1,288
574
122
193
517
14 F
(30) U
40 F
(16) U
(35) U
58 F
Identifiable Assets
Cash (average)
Accounts receivable (average)
Plant and equipment (net of depreciation € 3,200)
Total Identifiable Assets
94
377
2,763
3,234
108
357
2,764
3,229
(14)
20
(1)
5
Conditions for tourism
Average summer temperature
Expected growth
ROI
29.7
29.8
12%
14.2%
16.0%
Ex 4 – Spain Performance
SPAIN
Profit Plan
Volume
Euros
(‘000)
(‘000)
Actual
Volume
(‘000)
Variance
Euros
(‘000)
Sales Data
Sales ice-cream (volume in litres)
Sales specialties (litres)
Total Sales
3,685
409
4,094
16,294
3,330
19,624
3,575
400
3,975
15,507
3,251
18,758
(787) U
(79) U
(866) U
Cost of Goods Sold
Cost ice-cream
Dairy ingredients (litres)
Other Ingredients (100 gr.)
Labor (hours)
2,653
1,769
34.37
6,923
2,670
279
2,175
1,450
29.21
5,607
2,202
238
1,316 F
468 F
41 F
381
299
37.09
994
633
301
7,824
362
275
34.73
933
571
283
8,924
61 F
62 F
18 F
1,100 F
Cost specialties
Dairy ingredients (litres)
Other Ingredients (100 gr.)
Labor (hours)
Contribution margin
Other costs
Supervision, energy, maintenance, …
Depreciation
Transfer from France
Operating margin
2,145
391
5,288
2,166
391
2,126
4,241
(21) U
(2,126) U
(1,047) U
Selling and Administrative Expenses
Delivery expenses
Depreciation of trucks
Subcontracted transportation
Selling expenses
Advertising
Administrative salaries and expenses
Rent
Allocated central office expenses
Profits Before Interest and Taxes
736
413
827
1,406
620
100
158
1,028
758
424
77
786
1,408
644
100
193
(149)
(22) U
(11) U
(77) U
41 F
(2) U
(24) U
(35) U
(1,177) U
Identifiable Assets
Cash (average)
Accounts receivable (average)
Plant and equipment (net of depreciation €1,669)
Total Identifiable Assets
94
423
4,764
5,281
98
266
4,837
5,201
(4)
157
(73)
80
Conditions for tourism
Average summer temperature
Expected growth
ROI
30.2
28.5
10%
19.5%
-2.9%
Ex 5 – Transfer prices
Cost of
ingredients
Ice-cream
Cost
per litre
2.76
1.56
0.09
1.98
0.69
0.09
1,194
416
57
Allocated fixed costs (in Euros)
Other costs
Depreciation
S&A expenses
0.46
0.09
0.04
279
56
23
5 % profit margin
0.17
101
Total transfer price
3.53
2,126
Volume transferred (in ‘000 litres)
Actual Costs (in Euros)
Dairy ingredients
Other Ingredients
Labor
Total
(in ‘000 Euros)
603
Ex 6 – Sales and weather data
France
Italy
Year
Temperature
(degrees Celsius)
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009 (budget)
27.7
29.2
28.4
30.9
32.9
27.3
30.0
30.5
30.8
30.0
29.7
30.3
29.6
29.4
Average
29.8
Year
Temperature
(degrees Celsius)
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009 (budget)
32.2
30.4
28.6
31.8
28.1
28.2
29.0
28.3
30.1
30.0
Average
29.7
Sales Volume
(‘000 litres)
1,344
1,435
1,484
1,714
2,031
1,984
2,208
2,489
2,761
2,998
3,216
3,445
3,797
4,087
4,455
Sales Volume
(‘000 litres)
892
1,036
1,143
1,434
1,508
1,639
1,771
1,872
2,090
2,433
2,725
Volume Growth
Spain
Year
Temperature
(degrees Celsius)
6.7%
3.4%
15.5%
18.5%
-2.3%
11.3%
12.7%
10.9%
8.6%
7.3%
7.1%
10.2%
7.6%
9.0%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009 (budget)
30.8
31.2
29.0
31.6
29.8
28.3
28.0
27.5
29.9
30.4
31.8
32.4
30.4
31.0
9.1%
Average
30.2
Volume Growth
16.1%
10.3%
25.6%
5.1%
8.7%
8.0%
5.7%
11.7%
16.4%
12.0%
12.0%
Page 7
Sales Volume
(‘000 litres)
1,069
1,272
1,402
1,685
1,852
2,006
1,964
2,033
2,231
2,481
2,684
3,036
3,346
3,722
4,094
Volume Growth
18.9%
10.2%
20.2%
9.9%
8.3%
-2.1%
3.5%
9.8%
11.2%
8.2%
13.1%
10.2%
11.3%
10.0%
10.2%
Ex 6 – Sales and weather data
Temperature coefficient (rounded)
3%
Page 8