Revenue and Volume Variance

Polysar CASE Group 3 ??? ??? ??? ??? ??? • Polysar Limited - Established on 1942, Now employed 6,650 people - Structure : Basic Petrochemicals, Rubber, Diversified Products • Rubber Group is Profit Center - Rubber Group produced 46% of Polysar sales Group 3 - 2/13 • NASA - Sarnia 1 Plant : Produce Butyl & HaloButyl > HaloButyl (from 1984) - Sarnia 2 Plant : Produce Butyl (operation 1984) 1) 1984 : 95,000 t 2) 1985 : 65,000 t • EROW - Antwel plant : Produce Butyl & HaloButyl (1964, 1979 modified) 1) 1981 : Prduced Butyl(75%) & HaloButyl(25%) 2) 1985 : Prduced Butyl(50%, 45,000t), HaloButyl(50%, 45,000t) Transfer NASA to ERROW : Butyl(21,000t)

Group 3 - 3/13 Q1. The meaning and accuracy of the volume variance. • NASA Rubber Division? Sales Performance(1986) Actual Net sales Revenue 63,239,000 Budget 58,660,000 Deviation 4,579,000 exceed 3,735,000 exceed Gross Margin ? Sales Volume Up 40,945,000 37,210,000 ? Feedstock Cost Down Group 3 - 4/13 • NASA Rubber Division - Net Contribution(1986) Actual Budget Deviation Volume Variance - 11,375,000 -6,125,000 5,250,000 U Gross Profit / NSR 8. 2% 13. 7% -5. 5% Net Contribution - 876,000 2,005,000 -2,881,000 Group 3 - 5/13 • Volume Variance ? Volume Standard Fixed ? Actual Tonnes Produced Variance Cost Per Tonne ? ( + Demonstrated Capacity ) ?? ??? - ?? ?? ?? ???? (? ) ???? - Sarnia 2 (1984) - ?? ??? ?? ? ??? ??? ?? ? NASA to EROW ??? ??? ?? Group 3 - 6/13 Q2. The best sales and production strategy for EROW Division, NASA Division and the Rubber Group in Total. • EROW Division Strategy Transfer Advantage (From NASA) Feedstock ?? ???? ???? ?? ??? ???? - ????? Halobutyl ?? ?? ???? ???? ??? ??? ??? (???? )? ?? ??? ?????? Group 3 - 7/13 Accurate Budgeting • NASA Division Strategy ?? ??? Volume Variance? ??? ?? ??? ?? NASA? ?? ?? Not Transfer Reach Capacity SARNIA 2? Production Capacity? 95,000? (1984)?? 65,000(1986)? ?? Group 3 - 8/13 • The Rubber Group Strategy ?? Be a leader in high margin, specialty rubbers Main Strategy ?? ?? ???? ?? ??? ???? , ? ?? ??? ?? 1) Transfer? ?? ??? ?? (Regional Service) 2) ?? ??? ????? ?? ??? ??? ?? 3) ??? ?? ???? ?? ? ???? Group 3 - 9/13 Q3. Management accounting performance system to improve the reporting and evaluation of the Rubber Group performance will be raised. Strategy ?? ???? ??? ????? ???? ?? ???? ???? ??? ??? ????? ?? ?? ??? ?? ??? ?? Group 3 - 10/13 Strategy ?? ? ??? ???? ???? ????? ??? ?? ??? ?? ? ??? Transfer > ??? ??? ?? ??????? ?? > Transfer ??? ??? ???? ??? ?? ? Negotiation Price Group 3 - 11/13 • ????? ??? ???? ?? (?? ) Strategy SARIN 2 Product Volume Variance N N N Gross Profit / NSR E N Net Contribution E 1986 65,000 t 1987 95,000 t Improve 35,000 t 5,250,000 - 11,375,000 -6,125,000 ?? 8. 2% 35. 7% - 876,000 22,661,000 13. 7% ?? 5. 5% ?? 35. 7% ?? 2,005,000 ?? 22,661,000 ?? 2,881,000 ?? Be a leader in high margin, specialty rubbers Group 3 - 12/13 The End