Reader´s club
Reader´s Club
An editorial company that sells books, is in an expansion period and the management has decided to carry out a Management Control to find improvement opportunities.
One of the areas to review is the efficiency of the sales department, which includes the selling expense control. The controller has collected the following information:
Activities and lines of product
Books are sold on a door to door basis by the personnel in the selling department. Once the orders are placed, they are sent to the dispatch department. This department is the one that finally sends the books to the customers. Books are sent to clients using an external freight service.
There are three basic lines of products:
i) Paperback: small format of less than 200 pages. ii) Best Sellers: quality format editions of more than 600 pages. iii) Luxury Format: big volume specially binded and with hard cover.
Questions:
1. What is your opinion on the selling expenses incurred by the company? Do you think the deviation from budget is significant?
2. From a Management Control point of view, where do you think the problem is? What are the causes that could explain the deviations?
Budget
Budget2
Actual
Sales
4 000 000,00
4 800 000,00
4 800 000,00
Expenses
800 000,00
960 000,00
1 200 000,00
€240 000,00
Margin
2 000 000,00
3 840 000,00
3 600 000,00
€240 000,00
80%
75%
Budget
Actual
Variance
Sales comissions
200000
240000
4000
20%
Travelling expenses
160000
288000
1280
80%
Freight
440000
672000
2320
53%
Margin
800000
4000
50%
1200000
1. The selling expenses from the Reader´s club budget were for $800,000 but what they spent was much more significant from what they expect.It was a 50% variance between the budget and the actual spending situation.From my opinion this is a very significant figure.In my opinion, the problem is in
travelling
An editorial company that sells books, is in an expansion period and the management has decided to carry out a Management Control to find improvement opportunities.
One of the areas to review is the efficiency of the sales department, which includes the selling expense control. The controller has collected the following information:
Activities and lines of product
Books are sold on a door to door basis by the personnel in the selling department. Once the orders are placed, they are sent to the dispatch department. This department is the one that finally sends the books to the customers. Books are sent to clients using an external freight service.
There are three basic lines of products:
i) Paperback: small format of less than 200 pages. ii) Best Sellers: quality format editions of more than 600 pages. iii) Luxury Format: big volume specially binded and with hard cover.
Questions:
1. What is your opinion on the selling expenses incurred by the company? Do you think the deviation from budget is significant?
2. From a Management Control point of view, where do you think the problem is? What are the causes that could explain the deviations?
Budget
Budget2
Actual
Sales
4 000 000,00
4 800 000,00
4 800 000,00
Expenses
800 000,00
960 000,00
1 200 000,00
€240 000,00
Margin
2 000 000,00
3 840 000,00
3 600 000,00
€240 000,00
80%
75%
Budget
Actual
Variance
Sales comissions
200000
240000
4000
20%
Travelling expenses
160000
288000
1280
80%
Freight
440000
672000
2320
53%
Margin
800000
4000
50%
1200000
1. The selling expenses from the Reader´s club budget were for $800,000 but what they spent was much more significant from what they expect.It was a 50% variance between the budget and the actual spending situation.From my opinion this is a very significant figure.In my opinion, the problem is in
travelling