Haagen Dazs: Discover Your Indulgence
A Group Business Case
Presented to the
Accountancy Department
De La Salle University
In Partial Fulfillment
Of the Course Requirements
In ACCCOB3 Section K44
SUBMITTED TO:
Maria Bleselda B. Bauzon
SUBMITTED BY:
Aldover, Vince Eldrich, A.
Apostol, Louise Anthony, M.
Lopez, Kenneth Brian
Ong, Drew Russel, G.
So, Sean Andrew, L.
April 14, 2023
TABLE OF CONTENTS
Introduction
3
Differential Analysis on Production-related Constraints
4
Cost-Volume-Profit (CVP) Analysis
7
Variance Analysis
9
Conclusion
11
References
14
Introduction
Häagen-Dazs is meticulous when it comes to its ingredient selection. Because of this,
every scoop of their ice cream begins with a natural cream, milk, eggs, and sugar. Then, they
combine this with other carefully chosen ingredients to produce ice cream with a distinctive
flavor and silky texture. Since 1960, Häagen-Dazs has produced ice cream unlike any other.
Reuben Mattus, the company's founder, dreamed of creating the world's most remarkable ice
cream, a mouthful of luxury to escape the commonplace.
Moreover, Reuben only utilized ingredients of the most excellent kind he had
meticulously chosen to get there. 'If you are like everyone else, you are lost,' Reuben remarked.
As a result, Häagen-Dazs creates the most excellent ice creams possible, unlike any other. Since
Reuben's dedication to the best quality impacted how people thought about ice cream,
Häagen-Dazs established its trends and criteria. Häagen-Dazs was founded on these principles,
and they still guide them now. Therefore, the best ingredients can produce the ultimate flavor
since Häagen-Dazs stands for the idea that everyone should be able to enjoy a spoonful of
pleasure. Furthermore, Häagen-Dazs is bringing you over 800 unique stores inspired by that
location. As a result, you may luxuriate in 24 flavors anywhere in the world in an environment
almost as remarkable as the ice cream itself.
The distinctive range of seasonal specials and the more than 20 fascinating ice cream
concoctions and drinks, however, are what make their establishments irresistible. Häagen-Dazs
has also eliminated plastic spoons from their mini-cup multipacks since it is an environmentally
friendly business. Single-use plastics harm the environment, as is known to Häagen-Dazs. Since
then, plastic spoons have been removed from their mini-cup multipacks. Every year, 126 tons of
plastic might be saved if spoons were taken from multipacks. They are actively attempting to
further lessen the environmental impact of their ice cream as part of a process that would have a
good effect on the entire world. By 2025, Häagen-Dazs hopes to have all their packaging
recyclable, reducing environmental impact by 1700 tons yearly.
Differential Analysis on Production-related Constraints
Based on the constraint management data, the table of Contribution Margin per DLH as
different products were being produced to the market showed that prices varied as the demand
for each product was different, which also resulted in a difference in the values of Direct
Materials, Direct Labor, Variable Overhead, and Total variable cost. For the costs of the first
product, Classic has shown that in producing the product itself, costs were small, which led to it
having a unit selling price lower than its lineup products, resulting in (₱420). This resulted in a
Contribution Margin per Direct Labor Hour of (₱307). For the cost of the second product,
Layers has shown that in producing the product itself, costs were higher than Classics, leading to
a unit selling price of (₱490). This resulted in a Contribution Margin per Direct Labor Hour of
(₱237.59). For the third's product cost, Extraaz, which also has a high cost in producing the
product itself, explains that the unit selling price of the product, which is the most expensive of
all, is (₱750), which then results in a Contribution Margin per Direct Labor Hour of (₱599.5).
Ruby, as the fourth product of Haagen Dazs, has the highest cost amount among them all as the
costs required to produce ruby were above average, which led to a unit selling price of (₱450),
which then gave the lowest Contribution Margin per Direct Labor Hour of all that resulted in
(₱32.25). Last but not least, Divine, as the last product line of Haagen Dazs, has shown an
average amount of cost required to produce itself, which has a unit selling price of (₱540), which
resulted in a Contribution Margin per Direct Labor Hour of (₱439).
Based on the Production Schedule table, For the Classics, as the first product, has the
highest demand among the rest, which has (75,000) units, which shows that producing the
product does not need much Direct Labor Hour Per Unit since it only has a value of (0.65), that
resulted to a Total Direct Labor Hour of (48,750). Layers, on the other hand, which had a
demand in units of (42,000) resulted in a (0.85) in Direct Labor Hour Per Unit, then resulted in
(35,700) as the Total Direct Labor Hour. Extraaz then had a demand in units of (40,000), which
resulted in a (0.8) in Direct Labor Hour Per Unit, which then resulted in a Total Direct Labor
Hour of (32,000). Ruby, as the fourth product, has a demand in units resulting in (35,000), which
then resulted in (1.2) as the Direct Labor Hour Per Unit and (42,000) as the Total Direct Labor
Hour. Last but not least, Divine has a demand of (50,000) units, which resulted in a Direct Labor
Hour Per Unit of (0.7) and gave a Total Direct Labor Hour of (35,000). Overall, the Total Direct
Labor Hours required resulted in (193,450).
More than the current Capacity is needed to satisfy the current demand. For Ruby to
qualify for the company's current Capacity of 180,000 hours, a constraint has caused a reduction
in units; specifically, it had a reduction of 11,208 units for Ruby. Because adding all of Ruby's
worth would exceed the present Capacity needed for the company, so 11,208 units were deducted
to fit the current Capacity into the required number of hours. Ruby was also the product that was
cut since it had the lowest demand of all the products but had the highest variable cost; this
reduction action was taken to make Ruby suit the company's capacity requirements.
Based on the Production Schedule according to Capacity, very minimal changes were
seen. Ruby was the only one with a different value than the previous amount from the Production
Schedule. The Classics, as the first product, has the highest demand among the rest, which has
(75,000) units, which has shown that in producing the product, it does not need much Direct
Labor Hour Per Unit since it only has a value of (0.65), which resulted to a Total Direct Labor
Hour of (48,750). Layers, on the other hand, which had a demand in units of (42,000) resulted in
a (0.85) in Direct Labor Hour Per Unit, then resulted in (35,700) as the Total Direct Labor Hour.
Extraaz then had a demand in units of (40,000), which resulted in a (0.8) in Direct Labor Hour
Per Unit, which then resulted in a Total Direct Labor Hour of (32,000). Ruby, as the fourth
product, has a demand in units resulting in (23,792), which then resulted in (1.2) as the Direct
Labor Hour Per Unit and (28,550) as the Total Direct Labor Hour. Last but not least, Divine has
a demand of (50,000) units, which resulted in a Direct Labor Hour Per Unit of (0.7) and gave a
Total Direct Labor Hour of (35,000). Overall, the Total Direct Labor Hours required resulted in
(180,000).
Moving on to the fourth requirement, we have the values for each variable listed below
based on the Additional Price table. Starting with Additional Capacity, which produced a value
of (11,208). For the Highest Direct Labor, it then obtained a value of (1.2), (13,450) was then the
value for the Direct Labor Hour, (68) for the Direct Labor, and (914,573) for the Price to Pay.
The information for the Production Schedule was identical to that in the previous paragraph, but
it now also includes the Over-Capacity Payment, which came to ($13,154,600.00). The
information provided for the Production Schedule Based on Capacity was identical to the
previous sentence. However, it also included the value for Actual Capacity Payment, which
came to ($12,240,027.20).
To increase the products being produced for the company, Haagen Dazs must take action.
Some of these include investing in more machinery so that the business may profit by lowering
the workload on employees when the number of hours worked rises; doing so would also allow
employees to concentrate on other tasks, keeping them from getting too weary and allowing
them to work effectively throughout their obligations. The second is to extend the work hours
of workers for the business to be more time efficient and keep up with the growth in product
output. By doing this, both the workers' income and their level of satisfaction would rise. Finally,
the third step is to hire more employees or increase the number of workers so that the
company can double its output, raising demand for all of the products catered to.
Furthermore, since the data gathered for this study clearly shows that not all products
have the same level of demand, Ruby was far behind Classics, which had the lowest demand.
Increased production and demand for all products would have positive effects, such as
encouraging the company to create new products that customers want to try. This explains
changes in consumer behavior that Haagen Dazs should consider when developing new products
to ensure that brand loyalty continues to rise as customers only tire of the same flavor over time.
According to the research-based SWOT analysis of Haagen Dazs, it has been discussed that the
company's weakness is a lack of brand awareness, which inevitably leads to lower sales and
production for Haagen Dazs. According to the study's data, it would be preferable if Haagen
Dazs would lower the price of their products because they are pricey for the average consumer.
Doing so would also lower the cost of the products because the study's data showed that ice
cream production costs were somewhat high.
Cost-Volume-Profit (CVP) Analysis
Nestle's Break-Even Amount of Sales had a total fixed cost of (₱25,260,000). With a
Contribution Margin Ratio (CMR) of (47.55%) based on the data, this made the Break-Even
Amount total (₱53,127,517.10). The classics were the most in-demand of the product compared
to the other items, with a demand of (75,000) units for the company's sales. The Classics sold for
(₱420.00) for each unit, generating sales of (P31,500,000). With a (₱490.00) selling price per
unit and a (42,000) unit demand, The Layers generated sales of (₱20,580,000.00). Compared to
the other products, the Extraaz product has the highest selling price per unit at (₱750.00).
Demand for (40,000) units led to sales of (₱30,000,000.00). With (35,000) demand units and a
unit selling price of (₱450.00), the Ruby product had the lowest demand compared to the other
items, and as a result, its sales totaled (₱15,750,000.00). With a demand for (50,000) pieces and a
selling price per unit of (₱540.00), The Divine generated sales of (₱27,000,000.00).
With a total sales volume of (₱124,830,000.00) and a break-even amount of
(₱53,127,517.10), the Margin of Safety had a total margin of safety of (₱71,702,482.90) which
means it is a positive margin of safety that would help the business make more profits since it
exceeded their break-even point. The margin of safety (%) was produced by the margin of safety,
which had a total of (₱71,702,482.90), a Total Sales amount of (₱124,830,000.00), and produced
a total of (57.44%) of margin of safety (%). The margin of safety (%) of Häagen-Dazs exceeded
the bare minimum of 50% from the required margin of safety (%) for all the company that has a
higher fixed cost since lowering cost when sales are slow is challenging for the company a bare
minimum of 50% is required. The Contribution Margin's Classic product had a (75,000)-unit
demand, which led to a (₱199.55) CM Per Unit and a Contribution Margin of (₱14,966,250.00).
With (42,000) demand units, the Layers product from the Contribution Margin had a
Contribution Margin of (₱8,481,900.00) and a CM Per Unit of (₱201.95). With (40,000) demand
units and a CM Per Unit of (₱479.60), the Extraaz product from the Contribution Margin has the
most significant contribution margin compared to the other products. It also has the most
significant value of (₱19,184,000.00). With (35,000) demand units and a CM per unit of
(₱38.70), the Ruby product from the Contribution Margin has the lowest contribution margin of
all the other products. It also has the highest sum of (₱920,750.40). The Contribution Margin's
Divine product had (50,000) demand units, resulting in a CM Per Unit of (₱307.30) and a
Contribution Margin of (₱15,365,000.00). The total sum obtained by adding the contribution
margins from each product came to (₱58,917,900.40).
The Total Contribution Margin (CM), Net Operating Income, and Degree of Operating
Leverage (DOL) are the three factors that make up the DOL. By summing the contribution
margins from each product, a total of (₱59,351,650.00) was reached. A total of (₱21,345,930)
was created by the corporation for net operating income. The company has high financial
leverage due to its operations, as indicated by the Degree of Operating Leverage (DOL) score of
(2.78). However, it also faces a high risk of unforeseen events. This is because even small
changes in sales can significantly impact the company's operating income.
Variance Analysis
In the material variance of the brand Haagen-Dazs, the outcome of the computation in
material price variance is unfavorable. This indicates that the company will lose money because
the actual price (₱184,108,860.00) is higher than the standard price (₱184,084,875.00).
Furthermore, the outcome is favorable in the material quantity variance because the standard
quantity (1200000) is higher than the actual quantity (1,199,250). The material spending
variance resulted favorably because the outcome of MPV (₱23,985.00) is higher than the MQV
(-115,125). On the other hand, the labor rate variance was unfavorable because the actual Rate
(₱3,307,500.00) is higher than the standard Rate (₱3,213,000.00). The labor efficiency variance
resulted favorably because the standard hours (3,315,000) are higher than the actual hours
(3,213,000). Furthermore, labor spending variance is favorable because the LRV (₱94,500.00) is
also higher than LEV (-₱102,000.00). The result is unfavorable in the variable rate variance
because the Actual Rate (₱1,701,000.00) is higher than Standard Rate (₱1,653,750.00). For the
variable efficiency variance, the results were favorable, the result of Standard Hours (1,706,250)
was higher than the actual hours (1,653,750), and for the last results of the problem, the variable
spending variance, the results were favorable. The VMRV (₱47,250.00) is higher than the
VMEV (-₱52,500.00).
In the outcome of the variance, Material Spending Variance, Labor Spending Variance,
and Variable spending variance. The total spending variance resulted in -₱103,890, all favorable.
The company Haägen-Dazs made the right decisions to save more money on their spending or
expenses. The extra amount saved can be reused for upcoming projects or company plans, or
emergency funds can be used. The company should also maintain this strategy to help grow the
company Haägen-Dazs. With more amounts being saved, this will open more opportunities that
can happen to the company's future and reputation.
Furthermore, the results of having a favorable variance might be due to the company
occasionally sticking with the same suppliers. The suppliers might have given discounts or
offered bulk sales to help the company spend less and save more funds. Also, the company has
strict policies to follow regarding labor. They have to follow the company's protocols, which
ensures every worker is supervised and everyone is working and maintaining the company's
values, furthermore, for the utilities being used in the company. The company also focused on
saving electricity, water, etc., on maintaining a favorable variance outcome.
Conclusion
As presented in the analyses and demonstrated in the various computations, Haagen Daz
had an impressive run for the year. It is undeniable that Haagen Daz is a prominent brand that
has already established loyalty from its consumers. However, one of the factors to its success is
its five major and distinctive product lines—Classics, Layers, Extraaz, Ruby, and Divine.
With that, three particulars were analyzed for the given year: the company's management of
constrained resources, cost-volume-profit, and variance.
For Haagen Daz's capability to manage its constrained resources, it can be seen through
the analysis of its contribution margin per direct labor that most of its products reached the
equilibrium of the consumers' demands and the company's production capacity. However, with
their product line, Ruby, it has been analyzed that it has the lowest consumer demand while
sustaining an expensive overall production cost. Hence, it has the highest Direct Labor Hours,
amounting to 1.2. It is also further analyzed that Haagen Daz procured an additional capacity of
11,208 above the plant's capacity of 180,000.
For the cost-volume-profit analysis, it has been analyzed that the break-even sales for
Nestle amounted to ₱51,356,284.65. This is the amount Haagen Daz needs to reach to
remunerate the accumulated expenses the company incurred fully. Furthermore, the margin of
safety was analyzed, amounting to ₱71,702,482.90, garnering a margin of safety percentage
amounting to 57.44%. Since cutting costs when sales are slow is difficult for the firm, a
minimum of 50% is necessary. Therefore, Häagen-Dazs' margin of safety (%) exceeded the
required margin of safety (%) for all companies with a higher fixed cost.
For the variance analysis, the analyses for the computation are divided into materials,
labor, and variable overhead. It was surmised that the variance analysis results were unfavorable
for the materials' price, labor rate, and variable overhead costs rate. As a result, the company
accumulated more cash beyond the standard rates and prices. On the other hand, for the
material's quantity, labor efficiency, and variable overhead efficiency, it was surmised that the
results of the variance analysis were favorable. It means that the company accumulated lesser
cash than the standard price in terms of materials' quantity and procured lesser hours than the
standard hours in terms of labor and variable overhead efficiency. Then lastly, for the overall
spending variance of the materials, labor, and variable overhead costs, it was surmised that the
results of the variance analysis were favorable. This means that, although Haagen Daz had an
unfavorable variance for their price and rate variance, it balanced out when the company had a
favorable variance for their material quantity and efficiency from their labor and variable
overhead.
Recommendations
Based on the conclusion formulated by the case analysis of Nestlé's Haägen-Dazs, the
following recommendations should be considered by the company to continue operating at a
preferred performance level in the long term:
● To keep up with the public's demand for their products and maximize production, the
company should consider contingency plans regarding their direct labor hour capacity.
The company should be able to reduce or increase the output only following its capacity
to operate. Otherwise, the company should also improve or invest in more machinery and
workers to produce more units and meet the public's demand. Outsourcing from other
suppliers is also an alternative to not sacrificing the plant's capacity.
● The company could increase its direct labor hour capacity by allowing its employees to
work overtime while earning the extra income to eventually expand the workforce and
bring in more employees, resulting in more output.
● The company should also increase its efforts and invest strategies in penetrating the
market of ice cream in the Philippines to shift the demand at a preferential rate to
generate enough sales to reach a break-even point and to ensure that the company is
earning profit to cover the variable and fixed costs.
● For a favorable Material Price Variance, the company should consider integrating
higher-quality Milk Fat or materials in producing their Classics Line to avoid
overspending on more low-quality materials.
● For a favorable Labor Rate Variance, the company should consider hiring more skilled
supervisors in their plant to ensure that the employees are working efficiently to avoid
spending more with less work being put in. They could also invest in more machinery to
provide the employees with more support in performing their job.
● For a favorable Variable Rate Variance, the company should utilize lower-priced yet
effective indirect materials, often discounted at bulk purchases from other suppliers. They
should also strategize how to cut down utilities costs to promote a more efficient working
environment.
References
Our story: About häagen-dazs ice cream - häagen. Dazs. (n.d.). Retrieved April 14, 2023, from
https://www.haagen-dazs.co.uk/our-story
Team, M. B. A. S. (2021, September 26). Haagen Dazs SWOT analysis, competitors & USP.
MBA
Skool.
Retrieved
April
14,
2023,
from
https://www.mbaskool.com/brandguide/food-and-beverages/18240-haagen-dazs.html