BUsiness!!!!
Question 1
a.
Based on information provided in the question, the bonus for the Jane-HW7 manager for the last quarter of 2013 should be $0.
The quarterly bonus is determined by two factors: ROA and amount of profits exceeding profit target.
During the last quarter of 2013, the actual profit is low, which is $5,278.
The average total asset of the location is $200,000.
ROA=5,278÷200,000=1=2.639%
The number is far less than required ROA of 10%.
Furthermore, the profits ($5,278) is not exceeding profit target ($38,180).
As a result, the bonus for the last quarter of 2013 is $0.
However, as mentioned in the question, the owner has the right to make subjective adjustments for the effect of factors he deems outside the control of the location manager, which means the result of this question may not be same as calculated above. Unfortunately, the detailed adjustment is not presented in the question.
b.
We can get the following variance calculations based on the information provided:
1. Static budget variance
Variable cost is 50% of revenue, then budgeted variable cost is $5, and actual variable cost is $4.75.
Static budget variance = 470×27×(9.5 – 4.75) - 800×23×(10 - 5)= $510,775U
2. Flexible budget variance
470×27×[(9.5 – 4.75) - (10 - 5)] = $3,172.5U
3. Sales volume variance
(470×27 - 800×23) ×(10 - 5) = $23,550U
Based on the calculations, we can say that the management of Jane-HW7 location is below expectation.
There are several controllable factors in our calculations:
1. Number of vehicles washed in a good weather hour is controllable and it is well managed in Jane-HW7 location. The number is higher than budgeted number.
2. Average revenue per vehicle is controllable and it is not well managed in Jane-HW7 location since the revenue per vehicle is lower than budget.
3. Technically variable cost (including wage) is also controllable, even though it is set to 50% of the revenue.
Besides the factors mentioned above, day of good
a.
Based on information provided in the question, the bonus for the Jane-HW7 manager for the last quarter of 2013 should be $0.
The quarterly bonus is determined by two factors: ROA and amount of profits exceeding profit target.
During the last quarter of 2013, the actual profit is low, which is $5,278.
The average total asset of the location is $200,000.
ROA=5,278÷200,000=1=2.639%
The number is far less than required ROA of 10%.
Furthermore, the profits ($5,278) is not exceeding profit target ($38,180).
As a result, the bonus for the last quarter of 2013 is $0.
However, as mentioned in the question, the owner has the right to make subjective adjustments for the effect of factors he deems outside the control of the location manager, which means the result of this question may not be same as calculated above. Unfortunately, the detailed adjustment is not presented in the question.
b.
We can get the following variance calculations based on the information provided:
1. Static budget variance
Variable cost is 50% of revenue, then budgeted variable cost is $5, and actual variable cost is $4.75.
Static budget variance = 470×27×(9.5 – 4.75) - 800×23×(10 - 5)= $510,775U
2. Flexible budget variance
470×27×[(9.5 – 4.75) - (10 - 5)] = $3,172.5U
3. Sales volume variance
(470×27 - 800×23) ×(10 - 5) = $23,550U
Based on the calculations, we can say that the management of Jane-HW7 location is below expectation.
There are several controllable factors in our calculations:
1. Number of vehicles washed in a good weather hour is controllable and it is well managed in Jane-HW7 location. The number is higher than budgeted number.
2. Average revenue per vehicle is controllable and it is not well managed in Jane-HW7 location since the revenue per vehicle is lower than budget.
3. Technically variable cost (including wage) is also controllable, even though it is set to 50% of the revenue.
Besides the factors mentioned above, day of good