Smart Auto Clinic

We ve got a crisis on our hands We hod budgeted a Total Contribution of just over 5412,500 and we've lost about S44,350 it seems os though everything has gone wrong somehow

Akshay Arora, Administrator of Smart Auto Clinic was greatly concerned that the results of the year's operations were considerably worse than budgeted. One reason for this problem was that competition had forced the company to lower its price for one of its most significant jobs, but there appeared to be some other reasons as well Mr. Arora decided to analyze these reasons in preparation for his upcoming meeting with the clinic's supervisors.

BACKGROUND:

Smart Auto Clinic had been formed over five years ago. Initially its only fine of business was Silencer Replacements. As the quality of original equipment silencers improved, and as Mr. Arora realized that its customers were interested in more than just silencer replacements, the company expanded its product lines. Currently, the company offered four services for jobs as they frequently were called Silencer Replacement, Tune up, Brake Replacement, and Oll Replacement.

A distinctive feature of the dini was its use of mechanic assistants. Since much of the work traditionally done by mechanics did not require the skill of a trained mechanic, Mr. Arora realized that he could offer lower prices to his customers by having mechanics only perform those tasks that required their specialized skils. The remaining tdas were done by lower-skilled, and hence lower wage, mechanic attestants Another distincture feature of the clinic was its testing function. Mr. Arora had purchased some highly sophisticated equipment that allowed him to test the work of every job to make sure that

there were no detects. The equipment that tested silencer replacement, for example, assessed the quality of the seals between the silencer and tailpipes to make sure that they would not nupture

after only a few hundred miles of driving. Similarly, other equipment tested the timing of an engine following a tune-up

FINANCIAL INFORMATION:

Exhibit I contains the budgeted number of jobs, by type the budgeted price per job, and the budgeted variable expenses per job. classified into four inputs (variable costs mechanics mechanic assistant, supplies, and testing. It also shows the total revenue and variable expenses for each job typeand contribution of each job type. Mr. Arora asked his statt assistant, Anita Maru, to use the actual data for the period, shown in Exhibit 2, as the basis for preparing a variance analysis report on results for the year. Her report was contain a complete breakdown of the reasons why the clinic's actual profit diverged from the budget. The report would be used by Me. Arora for his meeting with the supervisor

Transcribed Image Text:

1 TEE_M3_Data Sheet - Excel (Product Activation Failed) DEVELOPER FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW F64 A Exhibit 1: Original Budget fx B ----- D E Brake Oil Silencer 2 No. of Jobs Replaceme 3,000 Tune-Up Total Replaceme Replaceme 4 Budgeted Price Per Job 200 5 Budgeted Total Revenue 600000 2,000 100 200000 1,000 500 6,500 150 40 150000 20000 970000 6 Budgeted Variable expense per Job 87.5 80 7 Total Variable Expenses Contribution 262500 337500 160000 40000 127.5 127500 15 22500 7500 12500 557500 412500 9 Variable Expense Details Silencer Brake Oil Mechanics 10 11 12 Average #minutes per Job 13 Average wage per minute 14 Total Expense per Job 15 16 Mechanic Assistants 17 Average #minutes per Job Replaceme Tune-Up Replaceme Replaceme 20 10 0.5 0.5 10 20 5 0.5 0.5 10 2.5 18 Average wage per minute 19 Total Expense per Job 30 0.25 7.5 1885 20 30 10 0.25 0.25 0.25 5 7.5 2.5 20 21 Supplies 22 Average #units per Job 1 4 23 Average expense per unit 25 10 10 2.5 24 Total Expense per Job 25 40 80 10 25 26 Testing 27 Average #tests per Job 28 Average wage per test 2 2 0 15 15 15 15 29 Total Expense per Job 45 30 30 0 30 31 Total Average Variable Expense per Jol 87.5 80 127.5 15 32 33 34 Exhibit 2: Actual Results for the Current Year 35 36 No. of Jobs 37 Actual Price Per Job 38 Actual Total Revenue 39 Total Variable Expenses 40 Contribution 41 42 13. Machanics Silencer Replaceme 2,300 200 Brake Oil Tune-Up Total Replaceme Replaceme 460000 1,800 90 162000 800 160 1700 40 6,600 128000 68000 818000 432400 198000 185200 46750 862350 27600 -36000 -57200 21250 -44350 Variable Expense Details Silencer Replaceme Tune-Up Brake Replaceme Replaceme Oil Module 03_Smart Auto Clinic Select destination and press ENTER or choose Paste Q Type here to search o ? H L M P T U V W X Y Q AA A ENG 11:50 01-02-2021 + 58% 1 TEE_M3_Data Sheet - Excel (Product Activation Failed) DEVELOPER FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW F64 A Exhibit 1: Original Budget fx B ----- D E Brake Oil Silencer 2 No. of Jobs Replaceme 3,000 Tune-Up Total Replaceme Replaceme 4 Budgeted Price Per Job 200 5 Budgeted Total Revenue 600000 2,000 100 200000 1,000 500 6,500 150 40 150000 20000 970000 6 Budgeted Variable expense per Job 87.5 80 7 Total Variable Expenses Contribution 262500 337500 160000 40000 127.5 127500 15 22500 7500 12500 557500 412500 9 Variable Expense Details Silencer Brake Oil Mechanics 10 11 12 Average #minutes per Job 13 Average wage per minute 14 Total Expense per Job 15 16 Mechanic Assistants 17 Average #minutes per Job Replaceme Tune-Up Replaceme Replaceme 20 10 0.5 0.5 10 20 5 0.5 0.5 10 2.5 18 Average wage per minute 19 Total Expense per Job 30 0.25 7.5 1885 20 30 10 0.25 0.25 0.25 5 7.5 2.5 20 21 Supplies 22 Average #units per Job 1 4 23 Average expense per unit 25 10 10 2.5 24 Total Expense per Job 25 40 80 10 25 26 Testing 27 Average #tests per Job 28 Average wage per test 2 2 0 15 15 15 15 29 Total Expense per Job 45 30 30 0 30 31 Total Average Variable Expense per Jol 87.5 80 127.5 15 32 33 34 Exhibit 2: Actual Results for the Current Year 35 36 No. of Jobs 37 Actual Price Per Job 38 Actual Total Revenue 39 Total Variable Expenses 40 Contribution 41 42 13. Machanics Silencer Replaceme 2,300 200 Brake Oil Tune-Up Total Replaceme Replaceme 460000 1,800 90 162000 800 160 1700 40 6,600 128000 68000 818000 432400 198000 185200 46750 862350 27600 -36000 -57200 21250 -44350 Variable Expense Details Silencer Replaceme Tune-Up Brake Replaceme Replaceme Oil Module 03_Smart Auto Clinic Select destination and press ENTER or choose Paste Q Type here to search o ? H L M P T U V W X Y Q AA A ENG 11:50 01-02-2021 + 58%