Budgeting Case : Olympic Wash

Olympic Wash is a high end car wash service based in northern Illinois. Being one of the most popular car washes in the area, they are known for their outstanding service and immaculate car washes. Olympic Wash is owned by Bob Nelson, a young entrepreneur who has had experience working in his family car repair business for over 10 years. Having owned a car repair shop in the same part of town, the Nelson family is well known and respected which helps Bob bring in many of their car repair customers for car washes.

Bob, who oversees the entire operation, also handles sales and marketing and works to prepare the 2013 budget with his company controller Christy Smith.

The one thing that Olympic strives for is to offer quality car washes that fully satisfy their customers. They offer three different types of car washes: Bronze for $8, Silver for $12, and Gold for $21. Each wash includes different services. Bronze includes just a car wash with the necessary soaps. Silver includes a car wash with the necessary soaps and a special coating is added to the car to give it extra shine. Lastly, Gold entails everything Silver has and also comes with a full vacuuming an d detailing of the inside of the car as well.

Bob has established his business as a prominent staple in the community and has seen a large amount of sales over the last couple years. Christy reported that the sales for 2012 were 9,400 washes of Bronze, 8,0 00 washes of Silver, and 6,700 of Gold. Bob also values customer satisfaction, as he feel that his business and community reputation and repeat business are the reasons that he has been so successful in the past. After every car wash each customer is given a card and is encouraged to respond to the short customer satisfaction survey about the service they received. Bob strives to maintain at least a 94% customer satisfaction rating and at the end of every year rewards his employees with a $100 bonus for eve r percentage above 94% in comparison to the total customer satisfaction rating for the year.

When debating over what the 2013 budget should look like Christy was adamant that through advertising they could raise their sales in all categories of washes . Bob estimated that with extra encouragement when customers came in that they could entice customers to go with the Silver or Gold wash instead of choosing Bronze.

They came to the conclusion that through a 10% increase in advertisement (PY $2,300) and encouragement they would see a growth in Silver by 15% and growth in Gold by 10%, with decrease of 10% in Bronze. With this increase in sales and time it takes to perform the higher level car washes, they figured they would have to hire an additional employee to help assist in the washing.

Some facts to consider for 2013:

-Salary and bonuses for the Bob and Christy are set at $95,000 plus a 5% bonus on any profitmade.

- Discounts are calculated at 2% of gross sales.

-Direct material costs for per wash for 2012 for Bronze washes = $2, Silver = $3, and Gold =$5.

-For 2013 they anticipate that Direct Material costs per wash will remain the same.

- Car wash employees have wages of $8/hour plus any tips received. There are currently 6 carwash employees in which it isanticipated that each employee will work for a total of 2,000hours a year (40 hour weeks with one week vacation and one week of sick time unpaid).

- After every 100 car washes hose valves have to be changed. These valves cost $8 to replace.

- Anticipating a customer satisfaction rating of 96%.

Yearly rent = $10,000

Insurance Premium = $3,000

Depreciation = $3,000

Miscellaneous Expenses = $1,600

Utilities Expense = $3,400

Other Operating Expense = 2% of Gross Sales

Your job is to assist Bob and Christy in preparing the operating budget for 2013

ACC 2020 Budget Case Worksheet Fall 2015 Olympic Wash (A) OPERATING BUDGET 2013 Budget 2013 Unit Count (Washes) Gross Sales (Less) Discounts-Coupons Net Sales Materials Labor Values Other Oper Expenses Gross Profit Advertising Rent Insurance Depreciation Miscellaneous Utilities (Non-Operating) Salaries Mngmt Total Expenses Profit before Bonus Management Bonus Employee Bonus Profit Sales Budget Worksheet: Bronze Total Units (2012) Budget Increase (decrease) Budget-2013 Average Price Budget Gross Sales by Type Less-Ave. Discount-Coupons Budget Net Sales by Type Net Ave. Price Cost Budget Worksheet: Material Other Operating Expenses Advertising (PY 2,300) Valves Labor: Number of Employees Number of Hours, Each Total Hours Rate Total Labor Cost Silver Gold Budget Totals