Chapter 14 - Operational Performance Measurement: Sales and Direct-Cost Variances, and the Role of Nonfinancial Performance Measures
14-1 Pet Groom & Clean (PG&C)
David Green is considering his operating statement for 2010, which is displayed in the table below. David is the manager of store number 88, where he began as one of the staff 6 years ago, and through hard work has risen to become manager of the store. The operating report shows his budgeted performance for the year and the actual results, showing a net improvement of 9% over budget--$405. While his results are positive, the small improvement over the budget does not qualify David for the bonus program which awards a $3,000 bonus for store managers who improve their performance over that of the budget by 20% or more. David manages one store in a 110 store chain of pet grooming stores owned by Pet Groom & Clean Company (PG&C). As for other PG&C stores, his store is open Monday through Saturday each week; the only service provided at the store is a service in which a pet, dog or cat, is groomed and cleaned, typically while the customer waits. The budgeted price for the service at the beginning of 2010 was $25. Budgeted variable costs were $2 for materials and $9 labor cost per service, as well as other variable costs of $1.50 per service. Materials are purchased by local store managers, and all staff are hired and supervised by the local store managers. Other budgeted and actual information for 2010 are shown in the table below. David is an ambitious and hard working manager, who has applied himself to the job and has looked for different ways to attract customers and to reduce costs. For example, he noticed that most of the company’s customers brought their pets in on Friday, Saturday, and Monday, and the number of customers was significantly lower on Tuesday through Thursday. In fact, David budgeted that 80% of total demand for 2010 would be in the Friday-Monday period, and only 20% would be in the...
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