Grieg LuxuryHotel has divided its downtown Atlanta hotel operations into several cost and revenue centers. One of these cost centers is the Housekeeping Department. Mr. Kleen, the head of the department, is responsible for purchasing all cleaningmaterials,managing all employees, purchasing cleaning equipment, and other items that are directly related to the department. Mr. Kleen is evaluated on how well he keeps his costs in line with his budget. For the month of May of the current year, he received the attached performance report from the accounting department of the hotel.

The general manager of the hotel wrote a brief memo to Mr. Kleen saying that "although you are not too far over budget, I expect my department managers to meet the budget that I have given them or stay under budget. You need to keep that in mind for future months."

REQUIRED:

(1) Comment on the format of the performance report prepared for the Housekeeping Department.

(2) Redraft the performance report in a format that conforms to good principles of responsibility reporting.

(3) What other problems do you feel that the hotel may have in its performance evaluation of its departments? Explain.

GRIEG LUXURY HOTEL HOUSEKEEPING DEPARTMENT PERFORMANCE REPORT FOR MONTH OF MAY

	Actual	Budget
Cleaning Supplies	$ 15,000	$ 15,200
Direct Labor--Housekeeping Staff	35,400	36,200
Depreciation on Cleaning Equipment	10,500	10,000
Office Supplies	1,250	1,300
Department Manager's Salary--Mr. Kleen	2,500	2,500
Utilities Cost--Allocated Based on Square Footage Occupied	3,200	2,950
Miscellaneous Cleaning Tools	900	885
General Overhead--Allocated Based on Number of Employees In Department	2,350	2,000
Total Costs	$ 71,100	$ 71,035