Budget variance Analysis Kerala Kaumudi
Budget variance Analysis – Kerala Kaumudi
Assumptions:
Fixed Costs : General expenses, corporate funds, Annual books, Capital expense
Variable Costs : Newsprint Costs, Channel expense
Sales Volume Variance: It is defined as (Actual units sold - Budgeted units sold) x Budgeted
price per unit.
Projected
Sales volume
Flexible
budget
variance
Budget
2368.21
-14.40
2353.81
OUTFLOW
SUM TOTAL
Analysis:
This is short by 14.40 lakhs. This means that the actual number of newspapers sold is less than
the budgeted number. We have assumed that the budget price to be the same as the actual
price in our case. Hence, there is no possibility of selling price variance.
Possible Reasons:
Competition: There are around 25 newspapers now in circulation in the state of Kerala. The
most prominent of them being Suprabhatham, Mathrubhumi, Madhyamam & Deshabhimani.
Readership of top Malayalam dailies are
Readership (in lakh)
Deshabhimani
Kerala Kaumudi
Madhyamam
Readership (in lakh)
Suprabhaatham
Mathrubhumi
Malayala Manorama
0 20 40 60 80 100120
Source: Indian Readership Survey
Cannibalism: The newspaper company released its online version Kerala Kaumudi Flash which
has the same content. Readers demand instant access to news, so newspapers have created
online editions. Some of these editions are free, whereas others are offered at a reduced rate or
licensed through digital media. Such formats virtually eliminate print and distribution costs, so
the newspaper feeds the news more quickly and efficiently. This is affecting the sales &
subscription of their traditional print based paper.
Flexible Budget Variance:
OUTFLOW
SUM TOTAL
Flexible
Budget
2353.81
Flexible budget
variance
Actual
2367.
13.99
80
The flexible budget variance is unfavorable with a value of 13.99 lakhs. For the same level of
activity there is a stark difference in the variable prices of channel expense (8.26 lakhs; actual
vs. flexible), newsprint costs (2.30 lakhs) and the fixed costs like general & corporate expenses
(13.1 lakhs)
Possible reasons:
Increased distribution & production expenses: Commodities like oil and paper have become
expensive as the general trend follows. The current newsprint cost is ₹ 28000-32000/ MT
(http://inma.org.in/trend.html). It constitutes around 55-60% of the production expense. This has
increased over the years and fluctuates heavily out of favor for the newspaper industry.
Increasing labor cost: The labor costs in printing have gone up over the year 2014-15. This has
caused a higher fixed expenditure by the management in terms of labor salary.
Assumptions:
Fixed Costs : General expenses, corporate funds, Annual books, Capital expense
Variable Costs : Newsprint Costs, Channel expense
Sales Volume Variance: It is defined as (Actual units sold - Budgeted units sold) x Budgeted
price per unit.
Projected
Sales volume
Flexible
budget
variance
Budget
2368.21
-14.40
2353.81
OUTFLOW
SUM TOTAL
Analysis:
This is short by 14.40 lakhs. This means that the actual number of newspapers sold is less than
the budgeted number. We have assumed that the budget price to be the same as the actual
price in our case. Hence, there is no possibility of selling price variance.
Possible Reasons:
Competition: There are around 25 newspapers now in circulation in the state of Kerala. The
most prominent of them being Suprabhatham, Mathrubhumi, Madhyamam & Deshabhimani.
Readership of top Malayalam dailies are
Readership (in lakh)
Deshabhimani
Kerala Kaumudi
Madhyamam
Readership (in lakh)
Suprabhaatham
Mathrubhumi
Malayala Manorama
0 20 40 60 80 100120
Source: Indian Readership Survey
Cannibalism: The newspaper company released its online version Kerala Kaumudi Flash which
has the same content. Readers demand instant access to news, so newspapers have created
online editions. Some of these editions are free, whereas others are offered at a reduced rate or
licensed through digital media. Such formats virtually eliminate print and distribution costs, so
the newspaper feeds the news more quickly and efficiently. This is affecting the sales &
subscription of their traditional print based paper.
Flexible Budget Variance:
OUTFLOW
SUM TOTAL
Flexible
Budget
2353.81
Flexible budget
variance
Actual
2367.
13.99
80
The flexible budget variance is unfavorable with a value of 13.99 lakhs. For the same level of
activity there is a stark difference in the variable prices of channel expense (8.26 lakhs; actual
vs. flexible), newsprint costs (2.30 lakhs) and the fixed costs like general & corporate expenses
(13.1 lakhs)
Possible reasons:
Increased distribution & production expenses: Commodities like oil and paper have become
expensive as the general trend follows. The current newsprint cost is ₹ 28000-32000/ MT
(http://inma.org.in/trend.html). It constitutes around 55-60% of the production expense. This has
increased over the years and fluctuates heavily out of favor for the newspaper industry.
Increasing labor cost: The labor costs in printing have gone up over the year 2014-15. This has
caused a higher fixed expenditure by the management in terms of labor salary.