2.2 Figuring out problems

This booklet includes two case studies.

A: The wrong number planning problem

This about a company that outsourced its computer needs and now want to shut down the operation again due to the loss it makes. The general revenue and loss figures are not meaningful here though because it should be looked at what the mother company looses when the shop is closed. It would probably have to pay more for the services on the market. On top of that it needs to be made clear what the real costs are and what the contribution is to find out how many real hours are needed to brake even, which is harder if there is the mix of direct relations to the Mother Company as well as commercial services.

B: The shock results problem

Here a company seems to be on the brink of recovery but a closer variance analysis reviews something else. Important here is to split everything up for product group so that you see which costs should come to which products and which revenue to which products to see the profit and loss on a per product basis. You need to look at volume and price variance, meaning changes in revenue/profit based on changes therein. It is important to split the figures into manageable parts that are relevant to monitoring.

Here it is important that financial calculations and analysis can be used to improve organisational performance. Cost analysis should help better understand contributions of products and services and with the ideas you get, find techniques and applications of interest.