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Cost analysis statement year-on-year

The common size statement shows that there are many significant changes throughout the period. It will now be useful to consider some of the changes that were highlighted, in more detail. First we will prepare a cost analysis statement showing changes in income and costs year-on-year. This can be reconciled to the changes in the profit before tax figures year-on-year.

Cost of sales37,80089,50090,000
Retail and distribution costs35,20052,30053,900
Administration costs11,70011,70040,900
Interest payable3,4007,70010,900
Miscellaneous –(balancing figure)1,8002002,300
Total costs89,900161,400198,000
Profit / –Loss before tax1,900–8,500–65,500
Included in the above:
Operating lease/hire charges9,5005,50015,100
Staff costs33,10029,10035,300
Exchange differences –fav +adv0–3,200–17,300

Cost analysis statement year-on-year

In the table above, we can see that the incremental revenue for the period 2011/12 was £132.5 million, while the incremental increase in costs was £198 million, which produced a reduction in the profit before tax of £65.5 million.

When we examine the figures for 2011/12 it can be seen that the cost of sales and retail and distribution cost increases are in line with the previous year even though incremental revenues have fallen. Given a similar decrease in costs for both items, cost of sales should be nearer to £77.6 million and retail and distribution costs nearer to £45.3 million. This shows that an additional £21 million was ‘consumed’ given the pro–rata movement.

Still considering the figures for 2011/12, the most obvious movement is in administration costs, a £40.9 million increase over the 2010/11 figure. Over a three year period this figure increases to £64.3 million.

In the bottom section of the statement we show a breakdown of some of the cost increases included in the top section. An interesting movement is the £35.3 million increase in staff costs of 2011/12. Looking at the three year period we see substantial increases in staff costs, 2009/10 saw £33.1 million increase and 2010/11 saw £29.1 million increase, some £97.5 million in the three years.

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