Question

# Consider the financial performance comparisons. Provide analysis (150 to 180 words) to describe the comparisons. KLM...

Consider the financial performance comparisons. Provide analysis (150 to 180 words) to describe the comparisons.

KLM Company

Comparison of financial performance

2012 and 2013

Account

2012

2013

\$ Difference

Per Cent

Common Size (per cent of sales income)

2012

2013

Sales Income

\$230,000

\$320,000

\$90,000

39

100

100

Cost of sales

\$115,000

\$165,000

\$50,000

43

50

51.6

Wage Costs

\$30,000

\$45,000

\$15,000

50

13

14

Transport Costs

\$25,000

\$35,000

\$10,000

40

10.9

10.9

Marketing Costs

\$15,000

\$20,000

\$5,000

33

6.5

6.3

Total costs

\$185,000

\$265,000

\$80,000

43

80.4

82.8

Profit

\$45,000

\$55,000

\$10,000

22

19.6

17.2

 KLM Company Comparison of financial performance 2012 and 2013 Account 2012 2013 \$ Difference Per Cent Common Size (per cent of sales income) 2012 2013 Sales Income \$230,000 \$320,000 \$90,000 39% 100 100 Cost of sales \$115,000 \$165,000 \$50,000 43% 50 51.6 Wage Costs \$30,000 \$45,000 \$15,000 50% 13 14 Transport Costs \$25,000 \$35,000 \$10,000 40% 10.9 10.9 Marketing Costs \$15,000 \$20,000 \$5,000 33% 6.5 6.3 Total costs \$185,000 \$265,000 \$80,000 43% 80.4 82.8 Profit \$45,000 \$55,000 \$10,000 22% 19.6 17.2
 SL Accounts Performance Caparison Remarks 1 Sales Sales of Company has increased from \$230 thousands to \$320 thousands which indicates a percentage growth of 39% which is goods for company performance as sales has increased by \$90000 Favorable for Organization 2 Cost of Sales Cost of Sales has increased from \$115 thousands to \$165 thousands which is not got for company because if we look at common size percentage then we observe that there is additional increment of 1.6% in cost of sales then last years , which is indicating inefficiency in cost of production and sales overhead . Unfavorable for Organization 2 Wages costs Wages cost has been increased from \$30000 to \$45000 and increment is by \$ 15000 which not good indicator of financial performance as there is 1% increase than last year keeping in view the growth in sales over last year wages should have near about \$41600 Unfavorable for organization 4 Transportation Cost Transportation cost has though increased from \$25000 to \$35000 but it still maintains the same percentage in common size statement of 10.9% of sales values therefore its neither favorable nor unfavorable but company should re think about various options so that overall cost to sales percentages can be reduced in future. neither favorable nor unfavorable 5 Marketing Cost There is increment of \$5000 in Marketing cost But considering the growth in sales we can observe that Marketing Cost has not increase in the same proportion as sales growth so it’s good indicator of better cost cutting and efficiency of sales Department Favorable for organization 6 Total Cost Overall total cost has increase due to unfavorable increase in wages in and cost of sales Unfavorable for organization 7 Profit Though overall Profit has increased from \$45000 to \$55000 by \$10000 which in mainly due to increase in sales yet company could have increased its profit if Cost of Production and wages could have been in the same proportion as it was in the last year. Overall growth Favorable for Organization

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