Management Principles & Practice

Topics: Expense, Operating expense, Income statement Pages: 2 (664 words) Published: January 21, 2013
The Wallingford Bowling Center
A group of twelve lifelong friends put together $1,200,000 of their own funds and built a $6,000,000, 48-lane bowling alley, near Norfolk, Virginia. Two of the investors became employees of the corporation. Ned Flanders works full-time as General Manager and James Ahmad, a licensed CPA, serves as Controller on a part-time basis. The beautiful, modern-day facility features a multilevel spacious interior with three rows of 16 lanes on two separate levels of the building, a full-service bar, a small restaurant, a game room (pool, videogames, pinball),and two locker rooms. The facility sits on a spacious lot with plenty of parking and room to grow. The bowling center is located in the small blue-collar town of Wallingford. There is no direct competition within the town. The surrounding communities include a wide-ranging mix of ethnic groups, professionals, middle- to upper-middle-class private homes, and apartment and condominium complexes ranging from singles to young married couples to senior citizen retirement units. Nearly 200,000 people live within 15 miles of Wallingford. The bowling center is open 24 hours per day and has a staff of 27 part- and full-time employees. After four years of operation, the partners find themselves frustrated with the low profit performance of the business. While sales are covering expenses, the partners are not happy with the end-of-year profit-sharing pool. The most recent income statement follows:

Sales$ 1,844,000
CGS 315,000
GM $ 1,529,000
Operating expenses $ 1,466,000
Mortgage $ 460,000
Depreciation 95,000
Utilities 188,000
Maintenance 70,000
Payroll 490,000
Supplies 27,000
Insurance 136,000
Taxable income $ 63,000
Taxes 19,000
Net income $ 44,000
The bowling center operates at 100 percent capacity on Sunday through Thursday nights from 6:00 P.M. until midnight. Two sets of men’s leagues come and go on each of those nights, occupying...
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