1. David Green is considering his operating statement for 2013, 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--GH¢405. While his results are positive, the small improvement over the budget does not qualify David for the bonus program which awards a GH¢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 2013 was GH¢25. Budgeted variable costs were GH¢2 for materials and GH¢9 labor cost per service, as well as other variable costs of GH¢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 2013 are shown in the table below.

Pet Groom and Clean: Store Number 88
Operating Statement	Year Ended December 31,
	Actual (GH¢)	Budget (GH¢)
Gross Sales	277,200	250,000
Less Variable Expenses
Food
Labour
Operating Expenses
Total Variable Expenses
Net contribution	143,550	125,000
Other Expenses
Training Expenses
Advertising
Service Development
Accounting and insurance
Taxes
Management overhead
Employee benefits
Total Other Expenses
Net Income	4,905	4,500	GH¢
Other Data
Average number of
TueWedTh	30%	20%
FriSatMon	70%	80%
Average price for dinner (before discount)
TueWedTh	GH¢	GH¢
FriSatMon	GH¢	GH¢
Number of employees
Hours worked, all employees
Wage rate for employees	GH¢	GH¢

Even on slow days; David scheduled the number of staff to meet the expected demand on each day, and because of his experience (and because his store encouraged appointments), his forecast of demand was usually quite accurate. Thus, labor cost is fairly treated as a variable cost for David’s store. Labor costs consists of 3 staff who are budgeted to work 2,500 hours per year at a budgeted pay rate of GH¢12 per hour, thus the total budgeted labor costs of GH¢90,000 (= 3 × GH¢12 × 2,500). Through his careful scheduling of staff, and his effective management style, Dave was able to save labor time so that each of the three employees worked only 2,250 hours in 2013. Other expenses include training expenses -- each staff employee is expected to have at least 6 hours of training at the PG&C headquarters during the year; the local store is charged GH¢250 per hour for this training. The local store manager determines the amount of training time for each staff.

Other expense also includes advertising expense, which is controlled by the local managers; PG&C recommends that advertising should be about 1% of total sales. Service development is the cost of studying new products for use in the stores and for the study of potential new ways to improve the services provided at PG&C stores. Service development is charged to each store based on the allocation rule of 10% of store sales. Accounting, insurance costs, taxes, and management overhead (which includes store rent and manager’s pay) are paid at the home office of PG&C and are allocated based upon a formula which combines store size, store sales, and the age of the store. Employee benefits accrue to staff at the rate of 20% of total pay. These benefit payments are contributed to a 401(k)-type retirement plan for each employee. The result of David’s promotional price for the Tuesday-Thursday period was successful, as total sales increased from 10,000 to 10,500 and the Tuesday-Thursday sales increased from 20% to 30% of total sales.

Required:

From David Green’s perspective, develop an analysis which explains your performance for the year ended December 31, 2013.