Bckerei Wulfhorst is a medium-sized bakery located in Bielefeld with eight shops, one production facility, 91 employees and 2.8 million annual sales (2016). The bakery evaluates its performance each month. The following income statement is provided for October 2017 (in ): Income Statement for the month of October 2017 Wulfhorst - Brotmanufaktur Oct 2017 % Oct 2016 % 232,486 100.0 245,598 100.0 Revenues of which: Revenue Shop 1 Revenue Shop 2 Revenue Shop 3 Revenue Shop 4 Revenue Shop 5 Revenue Shop 6 Revenue Shop 7 Revenue Shop 8 Revenue Other Resellers Revenue Personnel Cost of Goods Sold Gross Profit Wage Expense Depreciation Other operating expenses Total operating expenses Interest Expense Earnings before taxes Taxes (if - refund) Earnings after taxes Depreciation Cash Flow 35,398 30,902 20,991 31,003 30,999 26,455 22,718 16,620 14,758 2,642 45,523 186,963 116,518 19,189 52,245 187,951 3,228 -4,217 -11,235 7,018 14,420 21,438 15.2 13.3 9.0 13.3 13.3 11.4 9.8 7.2 6.4 1.1 19.6 80.4 50.1 8.3 22.5 80.8 1.4 -1.8 -4.8 3.0 6.2 9.2 42,309 40,376 19,981 30,331 31,569 25,882 20,844 17,827 14,296 2,185 40,897 204,701 116,021 23,539 53,377 192,938 3,260 4,720 0 4,720 14,945 19,665 17.2 16.4 8.1 12.4 12.9 10.5 8.5 7.3 5.8 0.9 16.7 83.3 47.2 9.6 21.7 78.6 1.3 1.9 0.0 1.9 6.1 8.0 Cofidential bu fhornt Protman folctur Question 1 (Ch1: Measuring Corporate Performance; 5 Points) Analyze this vertical and horizontal analysis of the income statement for the month of October 2017 by describing your observations. Question 2 (Ch3: Measuring Employee Performance and Incentive Systems; 25 Points) In addition to the performance measurement on corporate level, the company also evaluates performance on employee level. The bakery strongly relies on its revenues realized in its 8 bakery shops. However, shop assistants are not only involved with selling bakery products to the customers, but also in baking Brtchen (bread rolls) continuously in the shop ovens, cleaning machines (e.g. coffee machine) and the counter, and continuously decorating the food into the counter and the bread shelves during the day. Nevertheless, financial performance requires the shop assistants to be well-organized and do the side-jobs as well as making revenues. Moreover, a good shop assistant can strongly influence revenue by his/her personal selling abilities and a good service to the customer. The average revenue per customer at Wulfhorst is 3.57. Thus, it is highly relevant to analyze how much revenue each employee realizes. A benchmark for employee performance in the bakery industry defines that a shop assistant should realize 60 revenue per hour. Finally, sickness is driving the wage expenses. The average sick days over all employees in the bakery in 2017 were 10 days. a) Explain the requirements of performance measures in general. Develop two appropriate ratios to evaluate employee performance and calculate your ratios for the following four selected shop assistants (names changed): Shop Assistant Data for the Month October 2017: Shop Assistant Customers Working Hours Revenue Mrs Fenn Mrs Norris Mrs George Mrs Wibro Sum 1,582 916 2,367 2,649 7,514 119.00 94.70 144.66 126.04 484.40 5,216.00 3,501.09 9,061.50 7,925.19 25,703.78 Sick Days average month 0.50 6.00 0.25 2.25 9.00 b) Analyze the shop assistants' performance by plotting your calculated ratios in a diagram. Suggest management recommendations to improve the financial performance. Question 3 (Ch10: Short-Term Financial Planning; 15 Points) Bckerei Wulfhorst is considering a short-term investment for renovating their shop. However, for such a huge amount, they will need additional financing. Describe which short-term sources of financing they should consider and evaluate each source's feasibility to the bakery. Wir geben Imp Bckerei Wulfhorst is a medium-sized bakery located in Bielefeld with eight shops, one production facility, 91 employees and 2.8 million annual sales (2016). The bakery evaluates its performance each month. The following income statement is provided for October 2017 (in ): Income Statement for the month of October 2017 Wulfhorst - Brotmanufaktur Oct 2017 % Oct 2016 % 232,486 100.0 245,598 100.0 Revenues of which: Revenue Shop 1 Revenue Shop 2 Revenue Shop 3 Revenue Shop 4 Revenue Shop 5 Revenue Shop 6 Revenue Shop 7 Revenue Shop 8 Revenue Other Resellers Revenue Personnel Cost of Goods Sold Gross Profit Wage Expense Depreciation Other operating expenses Total operating expenses Interest Expense Earnings before taxes Taxes (if - refund) Earnings after taxes Depreciation Cash Flow 35,398 30,902 20,991 31,003 30,999 26,455 22,718 16,620 14,758 2,642 45,523 186,963 116,518 19,189 52,245 187,951 3,228 -4,217 -11,235 7,018 14,420 21,438 15.2 13.3 9.0 13.3 13.3 11.4 9.8 7.2 6.4 1.1 19.6 80.4 50.1 8.3 22.5 80.8 1.4 -1.8 -4.8 3.0 6.2 9.2 42,309 40,376 19,981 30,331 31,569 25,882 20,844 17,827 14,296 2,185 40,897 204,701 116,021 23,539 53,377 192,938 3,260 4,720 0 4,720 14,945 19,665 17.2 16.4 8.1 12.4 12.9 10.5 8.5 7.3 5.8 0.9 16.7 83.3 47.2 9.6 21.7 78.6 1.3 1.9 0.0 1.9 6.1 8.0 Cofidential bu fhornt Protman folctur Question 1 (Ch1: Measuring Corporate Performance; 5 Points) Analyze this vertical and horizontal analysis of the income statement for the month of October 2017 by describing your observations. Question 2 (Ch3: Measuring Employee Performance and Incentive Systems; 25 Points) In addition to the performance measurement on corporate level, the company also evaluates performance on employee level. The bakery strongly relies on its revenues realized in its 8 bakery shops. However, shop assistants are not only involved with selling bakery products to the customers, but also in baking Brtchen (bread rolls) continuously in the shop ovens, cleaning machines (e.g. coffee machine) and the counter, and continuously decorating the food into the counter and the bread shelves during the day. Nevertheless, financial performance requires the shop assistants to be well-organized and do the side-jobs as well as making revenues. Moreover, a good shop assistant can strongly influence revenue by his/her personal selling abilities and a good service to the customer. The average revenue per customer at Wulfhorst is 3.57. Thus, it is highly relevant to analyze how much revenue each employee realizes. A benchmark for employee performance in the bakery industry defines that a shop assistant should realize 60 revenue per hour. Finally, sickness is driving the wage expenses. The average sick days over all employees in the bakery in 2017 were 10 days. a) Explain the requirements of performance measures in general. Develop two appropriate ratios to evaluate employee performance and calculate your ratios for the following four selected shop assistants (names changed): Shop Assistant Data for the Month October 2017: Shop Assistant Customers Working Hours Revenue Mrs Fenn Mrs Norris Mrs George Mrs Wibro Sum 1,582 916 2,367 2,649 7,514 119.00 94.70 144.66 126.04 484.40 5,216.00 3,501.09 9,061.50 7,925.19 25,703.78 Sick Days average month 0.50 6.00 0.25 2.25 9.00 b) Analyze the shop assistants' performance by plotting your calculated ratios in a diagram. Suggest management recommendations to improve the financial performance. Question 3 (Ch10: Short-Term Financial Planning; 15 Points) Bckerei Wulfhorst is considering a short-term investment for renovating their shop. However, for such a huge amount, they will need additional financing. Describe which short-term sources of financing they should consider and evaluate each source's feasibility to the bakery. Wir geben Imp