Please answer question #2

Where should most of the decision rights for Darden reside? Corporate or SBUs?

Individual Project #2 - Budgeting Table 4: 202x Budget for each Olive Garden restaurant: Name: Total From our class session, we learned that Darden prepares an overall corporate budget as well as budgets for each of their Strategic Business Units as shown below. Their 202x budgets are static, and they are shown below: Olive Garden (Actual $) Individual Restaurant Jan Feb March April May June July Aug Sept Oct Nov Dec 4,950,146 412,529 412,529 412,529 412,529 412,529 412,529 412,529 412,529 412,529 412,529 412,529 412,529 3,015,012 61% 251,251 251,251 251,251 251,251 251,251 251,251 251,251 251,251 251,251 251,251 251,251 251,251 1,935,335 39.13 161,278 161,278 161,278 161,278 161,278 161,278 161,278 161,278 161,278 161,278 161,278 161,278 137,413 2.8% 11,451 11,451 11,451 11,451 11,451 11,451 11,451 11,451 11,451 11,451 11,451 11,451 Revenue COGS Labor and Material (Food/Beverage Gross Profit Less: Marketing and Restaurant Expenses Marketing Expenses Restaurant Expenses Depreciation Amortization Utilities Supplies Expense Insurance Rent Rent Expense Total Marketing and Restaurant Expenses Operating Income 9,623 115,473 2.3% 173,210 35% 28,868 0.0 17,321 0.3% 433,025 8.7 905,312 18 3% 1,030,023 20.8% 9,623 9,623 14,434 14,434 2,406 2,400 1.443 1,443 36,085 36,085 75,44375,443 85,835 85,835 9,623 9,623 9,623 9,623 9,623 9,623 9.52 9,52 9,623 14,434 14,434 14,434 14,434 14,434 14,434 14,434 14,434 14,434 14,434 2,406 2,406 2,406 2,406 2,406 2,400 2,400 2,406 2,406 2.406 1,443 1,443 1,443 1,443 1,443 1,443 1,443 1,443 1,443 1,443 36,085 36,085 36,085 36,085 36,085 36,085 36,085 36,085 36,085 36,0RS 75,443 75,443 75,443 75,443 75,443 75,443 75,443 75,443 75,443 75,443 85,835 85,835 85,835 85,835 85,835 85,835 85,835 85,835 85,835 85,835 Table 1: Darden - Overall corporate 202x Budget, including a breakout for each of the Business Segments Darden Restaurants (000,000's omitted) Combined Company Corporate Olive Garden Longhorn Fine Dining Other Revenue 8,510.4 4,287.3 1,810.6 605.9 1,806.6 COGS 5,183,6 60.9% 2,611.4 60.9% 1,102.8 60.9% 369.0 60.9% 1,100.4 60.9% Gross Profit 3,326.8 39.1% 1,675.9 39.1% 707.8 39.1% 236.9 39.1% 706.2 39.1% Less Expenses: Restaurant & Marketing Expenses 1,733.1 20.4% 791.9 18.5% 383.5 21.2% 109.3 18.0% 448.4 24.8% Sales, General, and Administrative 405.5 4.8% 405.5 Depreciation and Amortization 336.7 4.0% 336.7 Impairments 19.0 0.2% 19.0 Operating Income 832.5 9.8% (761.2) 884.0 20.6% 324.3 17.9% 127.6 21.1% 257.8 14.3% Interest Expense 50.2 0.6% 50.2 0.0% 0.0% 0.0% - 0.0% Net Income Before Taxes 782.3 9.2% (811.4) 884.0 20.6% 324.3 17.9% 127.6 21.1% 257.8 14.3% Income Taxes 63.7 0.7% 63.7 0.0% 0.0% 0.0% 0.0% Net Income 718.6 8.4% (875.1) 884.0 20.6% 324.3 17.9% 127.6 21.1% 257.8 14.3% Please answer each of the following eight (8) questions (each question is worth 2 points). Expand the space below each question as needed. Some of these questions are based on your opinion and will not have a wrong answer, but there are usually always "better" answers (as in this is the best way to do it). Please support your answers where necessary. 1. Where is most of the knowledge in the Darden organization? Corporate or the Strategic Business Units (SBU's)? Table 2: 202x Budget A further breakdown by each Segment - Olive Garden is our example Total Olive Garden (000,000's Omitted) 866 Restaurants 2. Where should most of the decision rights for Darden reside? Corporate or SBU's? 3. When Darden completes their annual operating budgets, how many years should the budget extend out. (i.e. 1 year or 20 years, etc.) Annual % 4,287 2,611 61% 1,676 39.1% Jan Feb March April May June July Aug Sept Oct Nov Dec 357 357 357 357 357 357 357 357 357 357 357 357 218 218 218 218 218 218 218 218 218 218 218 218 218 218 140 140 140 140 140 140 140 140 140 140 140 140 Revenue COGS Gross Profit Less Expenses: Restaurant & Marketing Expenses Operating Income 4. For the overall budgeting process for Darden, what is your recommendation on either a top-down approach, bottom up approach, or a combination of the two, and why? 66 792 18% 884 20.6% 66 74 66 74 66 74 66 74 66 74 66 74 66 74 66 74 66 74 66 74 66 74 74 5. For Olive Garden, at the restaurant level, should the budget be linked to incentives? If yes, how? If no, why not? Table 3: 202x Budget Olive Garden further breakout of line-item budgets under restaurant and marketing expenses: Total Olive Garden (000,000's Omitted) Marketing and Restaurant Line Item Expenses 6. If Olive Garden conducts variance analysis at the SBU level and the individual restaurant level how often and how should it be conducted? Total 119 15.0% 10 10 10 7. Should the Olive Garden's budgets be static or rolling? Why?| 1 1 8 1 8 1 8 8 8 8 8 8 8 Marketing Expenses Restaurant Expenses Openings Depreciation Amortization Utilities Supplies Expense Insurance Rent Expense Total Marketing and Restaurant Expenses 8 1.0% 100 12.6% 150 18.9% 25 3.296 15 1.996 375 47.4% 792 100.0% Jan Feb March April May June July Aug Sept Oct Nov Dec 10 10 10 10 10 10 10 10 10 1 1 1 1 1 1 1 1 8 8 8 13 13 13 13 13 13 13 13 13 13 13 13 2 2 2 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 31 31 31 31 31 31 31 31 31 31 31 66 66 66 66 66 66 66 66 66 8. If the "Corporate common costs equal $761,200,000 (at the operating income level) for the entire company (See table #1), what allocation base would you use to allocate this cost to each SBU? 1 1 2 1 31 66 66 66 Individual Project #2 - Budgeting Table 4: 202x Budget for each Olive Garden restaurant: Name: Total From our class session, we learned that Darden prepares an overall corporate budget as well as budgets for each of their Strategic Business Units as shown below. Their 202x budgets are static, and they are shown below: Olive Garden (Actual $) Individual Restaurant Jan Feb March April May June July Aug Sept Oct Nov Dec 4,950,146 412,529 412,529 412,529 412,529 412,529 412,529 412,529 412,529 412,529 412,529 412,529 412,529 3,015,012 61% 251,251 251,251 251,251 251,251 251,251 251,251 251,251 251,251 251,251 251,251 251,251 251,251 1,935,335 39.13 161,278 161,278 161,278 161,278 161,278 161,278 161,278 161,278 161,278 161,278 161,278 161,278 137,413 2.8% 11,451 11,451 11,451 11,451 11,451 11,451 11,451 11,451 11,451 11,451 11,451 11,451 Revenue COGS Labor and Material (Food/Beverage Gross Profit Less: Marketing and Restaurant Expenses Marketing Expenses Restaurant Expenses Depreciation Amortization Utilities Supplies Expense Insurance Rent Rent Expense Total Marketing and Restaurant Expenses Operating Income 9,623 115,473 2.3% 173,210 35% 28,868 0.0 17,321 0.3% 433,025 8.7 905,312 18 3% 1,030,023 20.8% 9,623 9,623 14,434 14,434 2,406 2,400 1.443 1,443 36,085 36,085 75,44375,443 85,835 85,835 9,623 9,623 9,623 9,623 9,623 9,623 9.52 9,52 9,623 14,434 14,434 14,434 14,434 14,434 14,434 14,434 14,434 14,434 14,434 2,406 2,406 2,406 2,406 2,406 2,400 2,400 2,406 2,406 2.406 1,443 1,443 1,443 1,443 1,443 1,443 1,443 1,443 1,443 1,443 36,085 36,085 36,085 36,085 36,085 36,085 36,085 36,085 36,085 36,0RS 75,443 75,443 75,443 75,443 75,443 75,443 75,443 75,443 75,443 75,443 85,835 85,835 85,835 85,835 85,835 85,835 85,835 85,835 85,835 85,835 Table 1: Darden - Overall corporate 202x Budget, including a breakout for each of the Business Segments Darden Restaurants (000,000's omitted) Combined Company Corporate Olive Garden Longhorn Fine Dining Other Revenue 8,510.4 4,287.3 1,810.6 605.9 1,806.6 COGS 5,183,6 60.9% 2,611.4 60.9% 1,102.8 60.9% 369.0 60.9% 1,100.4 60.9% Gross Profit 3,326.8 39.1% 1,675.9 39.1% 707.8 39.1% 236.9 39.1% 706.2 39.1% Less Expenses: Restaurant & Marketing Expenses 1,733.1 20.4% 791.9 18.5% 383.5 21.2% 109.3 18.0% 448.4 24.8% Sales, General, and Administrative 405.5 4.8% 405.5 Depreciation and Amortization 336.7 4.0% 336.7 Impairments 19.0 0.2% 19.0 Operating Income 832.5 9.8% (761.2) 884.0 20.6% 324.3 17.9% 127.6 21.1% 257.8 14.3% Interest Expense 50.2 0.6% 50.2 0.0% 0.0% 0.0% - 0.0% Net Income Before Taxes 782.3 9.2% (811.4) 884.0 20.6% 324.3 17.9% 127.6 21.1% 257.8 14.3% Income Taxes 63.7 0.7% 63.7 0.0% 0.0% 0.0% 0.0% Net Income 718.6 8.4% (875.1) 884.0 20.6% 324.3 17.9% 127.6 21.1% 257.8 14.3% Please answer each of the following eight (8) questions (each question is worth 2 points). Expand the space below each question as needed. Some of these questions are based on your opinion and will not have a wrong answer, but there are usually always "better" answers (as in this is the best way to do it). Please support your answers where necessary. 1. Where is most of the knowledge in the Darden organization? Corporate or the Strategic Business Units (SBU's)? Table 2: 202x Budget A further breakdown by each Segment - Olive Garden is our example Total Olive Garden (000,000's Omitted) 866 Restaurants 2. Where should most of the decision rights for Darden reside? Corporate or SBU's? 3. When Darden completes their annual operating budgets, how many years should the budget extend out. (i.e. 1 year or 20 years, etc.) Annual % 4,287 2,611 61% 1,676 39.1% Jan Feb March April May June July Aug Sept Oct Nov Dec 357 357 357 357 357 357 357 357 357 357 357 357 218 218 218 218 218 218 218 218 218 218 218 218 218 218 140 140 140 140 140 140 140 140 140 140 140 140 Revenue COGS Gross Profit Less Expenses: Restaurant & Marketing Expenses Operating Income 4. For the overall budgeting process for Darden, what is your recommendation on either a top-down approach, bottom up approach, or a combination of the two, and why? 66 792 18% 884 20.6% 66 74 66 74 66 74 66 74 66 74 66 74 66 74 66 74 66 74 66 74 66 74 74 5. For Olive Garden, at the restaurant level, should the budget be linked to incentives? If yes, how? If no, why not? Table 3: 202x Budget Olive Garden further breakout of line-item budgets under restaurant and marketing expenses: Total Olive Garden (000,000's Omitted) Marketing and Restaurant Line Item Expenses 6. If Olive Garden conducts variance analysis at the SBU level and the individual restaurant level how often and how should it be conducted? Total 119 15.0% 10 10 10 7. Should the Olive Garden's budgets be static or rolling? Why?| 1 1 8 1 8 1 8 8 8 8 8 8 8 Marketing Expenses Restaurant Expenses Openings Depreciation Amortization Utilities Supplies Expense Insurance Rent Expense Total Marketing and Restaurant Expenses 8 1.0% 100 12.6% 150 18.9% 25 3.296 15 1.996 375 47.4% 792 100.0% Jan Feb March April May June July Aug Sept Oct Nov Dec 10 10 10 10 10 10 10 10 10 1 1 1 1 1 1 1 1 8 8 8 13 13 13 13 13 13 13 13 13 13 13 13 2 2 2 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 31 31 31 31 31 31 31 31 31 31 31 66 66 66 66 66 66 66 66 66 8. If the "Corporate common costs equal $761,200,000 (at the operating income level) for the entire company (See table #1), what allocation base would you use to allocate this cost to each SBU? 1 1 2 1 31 66 66 66