Respected members of Board of Directors:
In this report, I will discuss the performance of NASA Division for the past 9 months during the fiscal year with special attention to the meaning and accuracy of the volume variance. Then I will identify the issues of the best sales and production strategy for EROW Division, NASA Division and the Rubber Group as a whole. At last, my recommendations of changes that should be made in the management accounting performance system to improve the reporting and evaluation of the Rubber Group performance will be raised.
NASA Rubber Division’s performance:
As shown on the statement of net contribution September 1986, NASA Rubber Division’s actual net sales revenue …show more content…
The other strategy is to accurately plan production budget. EROW operated near or at its nameplate capacity for several years. Those past actual production data help in future forecasting and budgeting. They also make estimates on the purchase from Sarnia. These estimates are based on the prediction of butyl and halobutyl sales and how hard they can load their plant. The overall sales estimates are usually within ten percent, unless an unexpected crisis occurs. The accurate planning helps EROW to achieve maximum plant capacity and avoid the unabsorbed fixed costs.
Last but not least, EROW has a superb management. They constantly investigate and be aware of change in customer demand make sure that the division could operate to meet fully the halobutyl demand. The management also allocates the production of halobutyl and regular butyl depends on the market needs. The efficiency of the management results in high gross margin of 61,447.