Walmart vs Amazon: Cost of Goods Sold and Revenue Analysis

The assignment compares the cost of goods sold (COGS) and revenue growth of Walmart and Amazon in 2018. It highlights key statistics such as COGS increase by 3.36% from 2017 for Walmart, while Amazon's COGS grew by 24.32%. Additionally, Walmart's gross profit margin decreased to 25.37% in Jan 31, 2018, whereas Amazon's gross profit margin was 37.77% in Mar 31, 2018. The analysis also covers net profit margins and return on assets (ROA) for both companies.

Task 1
Part 1)
(U) (U)
Price V Quantity V
Actual Quantity
Actual Price
460,000
DIRECT MATERIAL VARIANCE (VND)
Budget PriceBudget Price
Actual Quantity Budget Quantity
460,000
58,00062,000
1,840,000,000
28,520,000,000 26,680,000,000
400,000
23,200,000,000
58,000
3,480,000,000
Price variance: (1,840,000,000 / 26,680,000,000) *100% = 6.9%
Quantity variance: (1,840,000,000 / 26,680,000,000) * 100% = 15%
(U) (U)
Rate V
620,000
Budget Rate
50,000
Budget Rate
31,000,000,000
55,000
34,100,000,000
50,000
620,000
Actual Hour
Actual Rate
Actual Hour
3,100,000,000
600,000
Efficiency V
Standard Hour
DIRECT LABOR VARIANCE (VND)
30,000,000,000
1,000,000,000
Rate variance: (3,100,000,000 / 31,000,000,000) * 100% = 10%
Efficiency variance: (1,000,000,000 / 30,000,000,000) * 100% = 3.3%
(U) (U)
6,800,000,000
200,000
34,000 34,000
8,160,000,000
1,360,000,000
240,000
Budget Quantity
Standard Profit
SALE VARIANCE
300,000
Actual Quantity
Q.V
Budget Price
50,000,000,000
10,000,000,000
60,000,000,000
200,000
Actual Price
Actual Quantity
Price V
200,000
250,000
Actual Quantity
Standard Profit
Price variance: (10,000,000,000 / 60,000,000,000) * 100%= 16.67%
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Quantity variance: (1,360,000,000 / 8,160,000,000) * 100% = 16.67%
Favorable Adverse
8,160,000,000
10,000,000,000
1,360,000,000
(3,200,000,000)
1,840,000,000
3,480,000,000
3,100,000,000
1,000,000,000
(12,620,000,000)
4,000,000,000
5,000,000,000
(21,620,000,000)
Less: Direct Material V
Less: Actual Selling
Less: Actual Adminstration
Actual Profit
OPERATING STATEMENT OF HOANG TUAN COMPANY, 2018.
Price V
Quantity V
Less: Direct Labor V
Rate V
Efficiency V
Budget Gross Profit
Less: Sales Variance
Price Variance
Quantity Variance
Actual Sales - Bg COGS
50,000,000,000
28,520,000,000
34,100,000,000
(62,620,000,000)
(12,620,000,000)
4,000,000,000
5,000,000,000
(21,620,000,000)
Less: Actual Selling Expense
Less: Actual Administration Expense
Actual Profit
Budget Gross Profit
Less: COGS
Material
Labor
Gross Profit
INCOME STATEMENT
Part 2) Possible explanation and Recommendations:
The sudden increase in material usage in 2018 is about 15% of predicted
budget may possibly come from the following problems: use of unskilled
labor (for example, workers do not have skills to use materials to make
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clothes, cause wastes), and purchase of materials of lower quality than
the standard. To overcome the first problem, the Hoang Tuan company
should spend 2 – 3 weeks retaining those workers to have more work
skills. As for the second issue, HT can buy higher quality fabrics and
fabrics to avoid broken materials in the process, torn, stain. The
responsibility for material quantity variance is production manager
because production manager ensure that manufacturing processes run
reliability and efficiently including determining quality control standards
and workers.
Next is direct labor variance, the labor rate has reached 10%. The
common reason of unfavorable labor rate variance is inappropriate use of
labor. Specifically, if the tasks that are not so complicated are assigned to
very experienced workers, unfavorable labor rate variance may be the
result. Because highly experienced workers are paid high wages. This
responsibility is production manager because production manager must
ensure that workers do the right things, avoid the inaccurate use and
disadvantages for the company.
From the table, the price has decreased by 16.67%, due to fierce
competition from other suppliers and poor quality compared to the
standard. For those problems, Hoang Tan should create new, creative,
branded products, or superior marketing and customer care regimes;
buying and managing quality of materials to overcome competitors and
earn profits. Similarly, this trend also occurs in numbers, down 16.67%.
This can happen when not training employees in the production line can
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cause production lines to significantly slow down or change customer
tastes. Recommendation for this is retrain them in 1 week or fire them to
save costs. The responsibility for this part is sales manager because sales
manager helps company know the customer demands or trends so that
Hoang Tan can create good and create products to earn profit. In addition,
sales manager also motivates employees to achieve the company goals
easily.
Task 2
 Growth of COGS 2018 (millions of US) = (COGS 2018 / COGS 2017) *
100%
= (373,396 / 361,256) * 100% = 103.36% => Increasing 3.36%
from 2017
 Growth of sales 2018 (millions of US) = (Sales 2018 / Sales 2017) *
100%
= (500,343 / 485,873) * 100% = 102.98% => Increasing 2.98%
from 2017
 Gross profit margin (Jan 31, 2018) (millions of US) = (Gross profit
2018 / Revenue 2018) * 100% = (126,947 / 500,343) * 100% =
25.37% < 25.65% (Jan 31, 2017).
 Net profit margin (Jan 31, 2018) (millions of US) = (Consolidated net
income / Net sales) * 100% = (9,862 / 495,761) * 100% = 1.99% <
2.81% (Jan 31, 2017).
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 ROA (Jan 31, 2019) (millions of US) = (TTM Net income 2018 / Total
assets 2018) * 100% = (9,862 / 204,522) * 100% = 4.82%
 ROI (Jan 31, 2019) = 14.2%
By calculating such figures, we can see some information about Walmart
in 2018. Cost of goods sold in 2018 increased 3.36% from 2017, higher
than 0.08% increase from 2016 to 2017. Although, COGS of Amazon in
2018 was US 139,159 million, the growth of COGS reached 24.32%, higher
than Walmart’s. Sales in 2018 has increased 2.98% from 2017, it is larger
than the 0.78% increase from 2016 to 2017. The growth of sales of
Amazon was higher than Walmart’s, with 30.93% increase.
Next, gross profit margin in Jan 31, 2018 was 25.37%, lower than Jan 31,
2017. About Amazon – Walmart’s rival, the gross profit margin in 1st
quarter of 2018 (Mar 31, 2018) was 37.77%, higher than Walmart’s gross
profit margin. For fiscal year 2018, the reduction in gross margin was
mainly due to the impact of the price reduction for inventory liquidation
related to club closing, reclassifying some supply expenses from operating
expense to cost of goods sold, increased shrink, increased e-commerce
shipping costs and the investment in cash rewards.
Net profit margin in Jan 31, 2018 was 1.99%, it was reduced by 0.82%
compared to Jan 31, 2017. Net profit margin of Amazon in 1st quarter of
2018 was 2.04%, higher than Walmart and was increasing. ROA in Jan 31,
2018 of Walmart was 4.82%, lower than 6.8% in Jan 31, 2017. About
Amazon, ROA in 1st quarter of 2018 was 3.42%, lower than Walmart in
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January. Finally, ROI of Walmart in Jan 31, 2018 was 14.2%, lower than
15.2% in Jan 31, 2017. ROI of Amazon in 1st quarter of 2018 was 10.65%.
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