Loutang Power Company-Variance Explained

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Table of Contents 1.0 Introduction 2 2.0 Variance Analysis 2 3.0 Issue 8 3.1 Internal factor 8 3.1.1 Financial debt of company 8 3.2 Environmental factor 8 3.2.1 Purchaser (Customer) 8 3.2.2 Supplier 9 3.2.3 Government policy 10 4.0 Recommendation 11 4.1 Exploration for expansion area 11 4.2 Restructuring of coal’s supplier 13 4.3 Increase the capital of Luotang Power 13 4.4 Other alternatives for generate electrical power 15 5.0 Conclusion 16 1.0 Introduction Luotang Power Company was established by American independent power producer’s company with the special purpose of running a 600 Mega Watt (‘MW”) coal-fired power plant project. Luotang is located in Hubei Province, China. Now, Tan Min Yi as general manager of Luotang required to present his recent company’s performance to the Board of Directors of his parent company, China Hua Tong Power in following week. In this meeting, Tan would like to propose about the project of expansion at Luotang. Besides that, he actually hoped to receive the promotion as Executive Vice President from the recognition of management. He confidently believed that Luotang still performed well under himself and his team’s efforts during the year. Based on the income statement of Luotang, it was shown that the revenue of Luotang in year 2011 was increased around RMB5,769,000, 0.005% compared to previous year. However, the net profit from operations in year 2011 and 2010 were resulted RMB578,751,000 and 2010 was RMB670,061,000 it dropped by the amount of RMB91,310,000,13.6% compared with previous year. In order to get the promotion successfully, Tan decided to explain what is going on with the actual Luotang’s performance. At the same time, some recommendations also will suggested by Tan in this coming presentation. 2.0 Variance Analysis According to the case, Mr. Tan Min Yi

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