This ASSIGNMENT is worth 20% of the total mark for the course. Students are required to undertake and complete this ASSIGNMENT-SUBMISSION.

The ASSIGNMENT must be submitted by end of 3 OCTOBER 2016 through Blackboard

The ASSIGNMENT shall be submitted with a completed pro-forma cover sheet. All of the ASSIGNMENT must be the work of the student TEAM only.

Each member of the TEAM takes full (joint) responsibility for all the work submitted in the Assignment.?The University?s ethical requirements are to be complied with at all times.

Students are advised not to postpone the commencement of their work on the ASSIGNMENT.

PENALTIES FOR LATE SUBMISSION

University policy is that an assessment item submitted after the due date, without an approved extension, will be penalised at a rate of 10% per day of the possible maximum mark for the assessment item for each day or part day that the item is late. Weekends count as two days in determining the penalty. Assessment items submitted more than five days after the due date will be awarded zero marks.

ASSESSMENT OF TEAM STUDY

Each submitted TEAM ASSIGNMENT will be assessed from a maximum score of 20 marks. The assessment will be based on the content and presentation.

Students are advised not to postpone the commencement of their work on the ASSIGNMENT.

RECORDS

Students are advised to ensure that they retain a copy of the ASSIGNMENT submitted by them. Also they should retain their working papers, drafts and files until after the Course result is known.

PRESENTATION

It is important to read the file Guidelines for Writing Executive Reports 2016 on Blackboard.

The structure of the submitted ASSIGNMENT must comprise:

an Executive Report, in proper format, which must not be more than two

typed pages (double spaced, 12 pitch); and

an APPENDIX with any supporting materials, schedules, tables, diagrams or extended analyses related to and supporting the Executive Report. These are to be labelled as an ?Appendix ?? unless otherwise required. All materials in the Appendix must be in proper format and properly labelled.

The ASSIGNMENT shall be submitted with a pro-forma cover sheet from the Newcastle Business School that is signed by the students in the Team.

Useful guides for students in developing a report Executive Report) and report writing skills are to be found in the following publications as well as in the Auchmuty Library's referencing and citation guide on the internet site, http://www.library.newcastle.edu.au/resources/citation.html

For this ASSIGNMENT students are required to write an Executive Report that summarises the outcomes of your analysis and any recommendations. You can add as Appendices any number of supporting schedules and detailed workings that you feel are relevant to supporting the content of your Executive (Summary) Report.

Both the Executive Report and the supporting appendices are to be properly formatted, labeled and set out e.g. client?s name, period covered by analysis, key objectives. The appendices are to be numbered sequentially with a heading that reflects the nature of the Appendix. The Appendices should have the detailed worksheets and calculations. Only the key outcome(s)/conclusions arising from them are brought into the Executive Report (if sufficiently relevant) with a reference to the relevant Appendix which contains the supporting details.

The structure of the Executive Report is to comprise:

a concise introductory section that pinpoints the objective and scope of the Report;

the main section should be devoted to the analysis conducted and its outcomes and ?implications. ?

Finally, a brief conclusion section that would contain any recommendations arising from the ?analysis. ?

The Executive Report is not an essay, thus the presentation must be concise (brief) and focus on the main relevant-to-the-objectives features (minor features and extended explanations can be dealt with in the Appendix). ?On the other hand, the Executive (Summary) Report is NOT simply a listing of ?bullet points?. A narrative (showing the reasoning) is necessary in order to communicate logically and concisely the main features/outcomes of the detailed analysis undertaken. ?The ?Gold Guide? is designed to assist you to understand and meeting academic requirements, by summarising important points and providing website links. It gives you essential information on the basics of academic writing and critical thinking, essay writing, referencing, business reports, presentations and teamwork. The referencing style in the ?Gold Guide? is APA style which is the Faculty standard for Business courses. An electronic copy of the Gold Guide is available. ?Also refer to: ?the separate pdf file containing detailed Guidelines on how to compile, write and present a Report. The name of the file is - GUIDELINES FOR EXECUTIVE REPORT 2016

Dr. W. Motyka

WILDWOOD CREATIONS Ltd^[1]

Sam Dekkan, a part owner of the WILDWOOD CREATIONS Ltd, a maker, repairer and restorer of wooden outdoor entertainment furniture, was responsible for setting the charges for various kinds of repairs.

A potential customer had called to inquire about the cost to repair an outdoor set of chairs. Dekkan gave an estimated price for the job, after which the woman thanked him and let him know that she would be going elsewhere - a competitor.

Dekkan was aware that competition was increasing not only from the repair market but from the manufacturer of outdoor furniture with their low prices for new furniture. To attract repair jobs and avoid layoffs, Dekkan and his partners had lowered prices for minor repairs for the first time in a decade. Dekkan had once again looked at the budgeted and the actual Operating Profit statement. How could he tell what portion of the company?s profits were due to the price decreases and how much was related to other factors?

BACKGROUND

WILDWOOD CREATIONS Ltd is a small shop-factory that specialises in repairing, restoring and making (a standard design) outdoor table and small entertainment furniture.

SERVICES

Currently, WILDWOOD CREATIONS offers four main services:

major repairs,

minor repairs,

making a variety of new outdoor furniture: tables, bench seats, chairs, outdoor coffee tables, small storage cabinets. It uses its standard designs and can also adapt those designs for customer preferences (size, colour, height, material variations);

restoring used outdoor furniture brought in by customers (however, not restoring antique furniture),

Historically, minor furniture repair jobs were billed at a rate of $65.00 an hour. The minor repairs of furniture pieces was carried out by the four full-time salaried employees.

In addition, Rush-jobs for minor repairs were occasionally performed for local customers only. These jobs were sub-contracted to a group of people who were retired employees of the WILDWOOD CREATIONS. They carried out the repairs for $27 an hour. Rush jobs were charged under flat-fee arrangements that averaged $160 per job. Usually, the average time that a Rush-job took was three hours to complete.

Major repairs and restorations were performed under individual flat-fee^[2] agreements that were quoted to customers based on the type of work needed for each piece of furniture. The three owners of WILDWOOD CREATIONS?s as well as their four employees carried out all the major Repair Jobs as well as making new furniture in the shop-factory facilities.

THE ANNUAL OPERATING COSTS

Before the start of the current year under review (July 2015 to June 2016), Dekkan?s accountant had prepared the annual operating plan for the business [SCHEDULE 1] in the APPENDIX. WILDWOOD CREATIONS? business was small and relatively straightforward, which made it possible to develop the company?s operating budget using specific volume and revenue data for each product-service area.

The following information was used in preparing the annual plan for July 2015 ? June 2016:

Based on earlier years? work orders (2014-2015), the business was expected to carry out the following number of jobs in the July 2015 ? June 1016 year:

390 major repairs Jobs; 1,830 minor repairs Jobs; 540 restoration Jobs; also, the company expected to receive order to make and sell 520 standard new outdoor tables.

In addition, it expected to take on 50 rush repair jobs.

The average major repairs Jobs were to be charged a price of $450 per Job. The average major repair Job was expected to take an average four hours to complete.

The minor repair Jobs were to be quoted the price of $320, respectively. The minor repair Job work was expected to take an average of two hours to complete.

The sale price of standard new outdoor tables was expected to average $680 per table.

All three partners were to be paid an annual base salary of $60,000 plus bonuses of 5% based on the total sales revenue of the company for year July 2015 to June 2016.

The hourly wage rate for (wages) employees was to be $28 an hour for work done.

The four salaried employees are paid an annual base salary of $43,000.

Replacement parts and other supplies were budgeted at $120 for each major job and $47 for each minor job (including Rush jobs). This estimated cost was based on experience. The making of new tables requires various materials that combined represent an expected cost of $140 per table.

Approximately 35% of the furniture repair Jobs that WILDWOOD CREATIONS worked on were transported to the shop-factory from outside of the city. The company expected to incur average transportation charges of $38 per package to transport the repaired furniture pieces back to their owners after the work was completed.

The budgeted advertising, depreciation, office rent, and miscellaneous expenses were treated as fixed expenses.

ACTUAL RESULTS FOR THE YEAR

At the end of the year (June 2016), Dekkan?s accountant prepared the actual Operating Profit statement shown in the last column of SCHEDULE 1. Although Dekkan knew that WILDWOOD CREATIONS had experienced significant changes during the past year, he was still shocked to discover that the company?s profit was $2,917 less than the budget for that year even though revenues had increased by $55,390. In order to understand fully the decrease in profits, Dekkan gathered the following information:

Owing to increased competition, major repairs were billed at $60 an hour.

The planned and the actual number of Jobs as well as the average hours per job are presented in SCHEDULE 2 in the Appendix.

On average, major repairs and restorations required more replacement parts than in past years. The replacement parts expenses for major repairs Jobs were $120 per job for the year, while for minor repair Jobs the cost was $47. The materials for new tables was $140 per table.

The transportation-delivery expenses were $38 per package.

Advertising expenses were $2,000 more than budgeted owing to an unplanned printing of flyers for the new standard design table that was now available.

Miscellaneous expenses, however, were $900 less than the budgeted amount.

REQUIRED

Analyse the information about the activities and financial performance WILDWOOD CREATIONS Ltd. Prepare an Executive Report of no more than 2 pages for the owners of Wildwood Creations, setting out the overall outcomes and conclusions of your analysis which addresses the following listed requirements and issues.

The two page report is to be in proper format, structure and style, and is to be accompanied by relevant Appendices. The Appendices of relevant Schedules are to be in a proper presentation format, and structured to show the relevant calculations that support your analysis. There is no limit on the number of schedules/tables/workings that the APPENDIX contains. However, these schedules/tables and workings must be clearly formatted and understandable.

Suggestions:

Prepare a schedule showing the differences between the planned outcome and the actual results for WILDWOOD CREATIONS for the period July 2015 to June 2016.

Prepare a profit reconciliation of planned versus actual profit by quantifying, in dollar terms, all significant factors.

Prepare a revised budget using all the previous planning assumptions, but use the total actual number of jobs that WILDWOOD CREATIONS company worked on during the year July 2015 to June 2016. In essence create a flexible budget based on the actual number of jobs worked on.

Consider how the different compensation (salaries, wages) arrangement of the company affect profit?

What changes should Dekkan and his partners consider making based on the results of your analysis.

[1] Dr. W. Motyka 2016. All rights reserved.

[2] Flat-fee: means a fee amount that does not change no matter how much the cost of the item eventually turns out to be.

This ASSIGNMENT is worth 20% of the total mark for the course. Students are required to undertake and complete this ASSIGNMENT-SUBMISSION.

The ASSIGNMENT must be submitted by end of 3 OCTOBER 2016 through Blackboard

The ASSIGNMENT shall be submitted with a completed pro-forma cover sheet. All of the ASSIGNMENT must be the work of the student TEAM only.

Each member of the TEAM takes full (joint) responsibility for all the work submitted in the Assignment.?The University?s ethical requirements are to be complied with at all times.

Students are advised not to postpone the commencement of their work on the ASSIGNMENT.

PENALTIES FOR LATE SUBMISSION

University policy is that an assessment item submitted after the due date, without an approved extension, will be penalised at a rate of 10% per day of the possible maximum mark for the assessment item for each day or part day that the item is late. Weekends count as two days in determining the penalty. Assessment items submitted more than five days after the due date will be awarded zero marks.

ASSESSMENT OF TEAM STUDY

Each submitted TEAM ASSIGNMENT will be assessed from a maximum score of 20 marks. The assessment will be based on the content and presentation.

Students are advised not to postpone the commencement of their work on the ASSIGNMENT.

RECORDS

Students are advised to ensure that they retain a copy of the ASSIGNMENT submitted by them. Also they should retain their working papers, drafts and files until after the Course result is known.

PRESENTATION

It is important to read the file Guidelines for Writing Executive Reports 2016 on Blackboard.

The structure of the submitted ASSIGNMENT must comprise:

an Executive Report, in proper format, which must not be more than two

typed pages (double spaced, 12 pitch); and

an APPENDIX with any supporting materials, schedules, tables, diagrams or extended analyses related to and supporting the Executive Report. These are to be labelled as an ?Appendix ?? unless otherwise required. All materials in the Appendix must be in proper format and properly labelled.

The ASSIGNMENT shall be submitted with a pro-forma cover sheet from the Newcastle Business School that is signed by the students in the Team.

Useful guides for students in developing a report Executive Report) and report writing skills are to be found in the following publications as well as in the Auchmuty Library's referencing and citation guide on the internet site, http://www.library.newcastle.edu.au/resources/citation.html

For this ASSIGNMENT students are required to write an Executive Report that summarises the outcomes of your analysis and any recommendations. You can add as Appendices any number of supporting schedules and detailed workings that you feel are relevant to supporting the content of your Executive (Summary) Report.

Both the Executive Report and the supporting appendices are to be properly formatted, labeled and set out e.g. client?s name, period covered by analysis, key objectives. The appendices are to be numbered sequentially with a heading that reflects the nature of the Appendix. The Appendices should have the detailed worksheets and calculations. Only the key outcome(s)/conclusions arising from them are brought into the Executive Report (if sufficiently relevant) with a reference to the relevant Appendix which contains the supporting details.

The structure of the Executive Report is to comprise:

a concise introductory section that pinpoints the objective and scope of the Report;

the main section should be devoted to the analysis conducted and its outcomes and ?implications. ?

Finally, a brief conclusion section that would contain any recommendations arising from the ?analysis. ?

The Executive Report is not an essay, thus the presentation must be concise (brief) and focus on the main relevant-to-the-objectives features (minor features and extended explanations can be dealt with in the Appendix). ?On the other hand, the Executive (Summary) Report is NOT simply a listing of ?bullet points?. A narrative (showing the reasoning) is necessary in order to communicate logically and concisely the main features/outcomes of the detailed analysis undertaken. ?The ?Gold Guide? is designed to assist you to understand and meeting academic requirements, by summarising important points and providing website links. It gives you essential information on the basics of academic writing and critical thinking, essay writing, referencing, business reports, presentations and teamwork. The referencing style in the ?Gold Guide? is APA style which is the Faculty standard for Business courses. An electronic copy of the Gold Guide is available. ?Also refer to: ?the separate pdf file containing detailed Guidelines on how to compile, write and present a Report. The name of the file is - GUIDELINES FOR EXECUTIVE REPORT 2016

Dr. W. Motyka

WILDWOOD CREATIONS Ltd^[1]

Sam Dekkan, a part owner of the WILDWOOD CREATIONS Ltd, a maker, repairer and restorer of wooden outdoor entertainment furniture, was responsible for setting the charges for various kinds of repairs.

A potential customer had called to inquire about the cost to repair an outdoor set of chairs. Dekkan gave an estimated price for the job, after which the woman thanked him and let him know that she would be going elsewhere - a competitor.

Dekkan was aware that competition was increasing not only from the repair market but from the manufacturer of outdoor furniture with their low prices for new furniture. To attract repair jobs and avoid layoffs, Dekkan and his partners had lowered prices for minor repairs for the first time in a decade. Dekkan had once again looked at the budgeted and the actual Operating Profit statement. How could he tell what portion of the company?s profits were due to the price decreases and how much was related to other factors?

BACKGROUND

WILDWOOD CREATIONS Ltd is a small shop-factory that specialises in repairing, restoring and making (a standard design) outdoor table and small entertainment furniture.

SERVICES

Currently, WILDWOOD CREATIONS offers four main services:

major repairs,

minor repairs,

making a variety of new outdoor furniture: tables, bench seats, chairs, outdoor coffee tables, small storage cabinets. It uses its standard designs and can also adapt those designs for customer preferences (size, colour, height, material variations);

restoring used outdoor furniture brought in by customers (however, not restoring antique furniture),

Historically, minor furniture repair jobs were billed at a rate of $65.00 an hour. The minor repairs of furniture pieces was carried out by the four full-time salaried employees.

In addition, Rush-jobs for minor repairs were occasionally performed for local customers only. These jobs were sub-contracted to a group of people who were retired employees of the WILDWOOD CREATIONS. They carried out the repairs for $27 an hour. Rush jobs were charged under flat-fee arrangements that averaged $160 per job. Usually, the average time that a Rush-job took was three hours to complete.

Major repairs and restorations were performed under individual flat-fee^[2] agreements that were quoted to customers based on the type of work needed for each piece of furniture. The three owners of WILDWOOD CREATIONS?s as well as their four employees carried out all the major Repair Jobs as well as making new furniture in the shop-factory facilities.

THE ANNUAL OPERATING COSTS

Before the start of the current year under review (July 2015 to June 2016), Dekkan?s accountant had prepared the annual operating plan for the business [SCHEDULE 1] in the APPENDIX. WILDWOOD CREATIONS? business was small and relatively straightforward, which made it possible to develop the company?s operating budget using specific volume and revenue data for each product-service area.

The following information was used in preparing the annual plan for July 2015 ? June 2016:

Based on earlier years? work orders (2014-2015), the business was expected to carry out the following number of jobs in the July 2015 ? June 1016 year:

390 major repairs Jobs; 1,830 minor repairs Jobs; 540 restoration Jobs; also, the company expected to receive order to make and sell 520 standard new outdoor tables.

In addition, it expected to take on 50 rush repair jobs.

The average major repairs Jobs were to be charged a price of $450 per Job. The average major repair Job was expected to take an average four hours to complete.

The minor repair Jobs were to be quoted the price of $320, respectively. The minor repair Job work was expected to take an average of two hours to complete.

The sale price of standard new outdoor tables was expected to average $680 per table.

All three partners were to be paid an annual base salary of $60,000 plus bonuses of 5% based on the total sales revenue of the company for year July 2015 to June 2016.

The hourly wage rate for (wages) employees was to be $28 an hour for work done.

The four salaried employees are paid an annual base salary of $43,000.

Replacement parts and other supplies were budgeted at $120 for each major job and $47 for each minor job (including Rush jobs). This estimated cost was based on experience. The making of new tables requires various materials that combined represent an expected cost of $140 per table.

Approximately 35% of the furniture repair Jobs that WILDWOOD CREATIONS worked on were transported to the shop-factory from outside of the city. The company expected to incur average transportation charges of $38 per package to transport the repaired furniture pieces back to their owners after the work was completed.

The budgeted advertising, depreciation, office rent, and miscellaneous expenses were treated as fixed expenses.

ACTUAL RESULTS FOR THE YEAR

At the end of the year (June 2016), Dekkan?s accountant prepared the actual Operating Profit statement shown in the last column of SCHEDULE 1. Although Dekkan knew that WILDWOOD CREATIONS had experienced significant changes during the past year, he was still shocked to discover that the company?s profit was $2,917 less than the budget for that year even though revenues had increased by $55,390. In order to understand fully the decrease in profits, Dekkan gathered the following information:

Owing to increased competition, major repairs were billed at $60 an hour.

The planned and the actual number of Jobs as well as the average hours per job are presented in SCHEDULE 2 in the Appendix.

On average, major repairs and restorations required more replacement parts than in past years. The replacement parts expenses for major repairs Jobs were $120 per job for the year, while for minor repair Jobs the cost was $47. The materials for new tables was $140 per table.

The transportation-delivery expenses were $38 per package.

Advertising expenses were $2,000 more than budgeted owing to an unplanned printing of flyers for the new standard design table that was now available.

Miscellaneous expenses, however, were $900 less than the budgeted amount.

REQUIRED

Analyse the information about the activities and financial performance WILDWOOD CREATIONS Ltd. Prepare an Executive Report of no more than 2 pages for the owners of Wildwood Creations, setting out the overall outcomes and conclusions of your analysis which addresses the following listed requirements and issues.

The two page report is to be in proper format, structure and style, and is to be accompanied by relevant Appendices. The Appendices of relevant Schedules are to be in a proper presentation format, and structured to show the relevant calculations that support your analysis. There is no limit on the number of schedules/tables/workings that the APPENDIX contains. However, these schedules/tables and workings must be clearly formatted and understandable.

Suggestions:

Prepare a schedule showing the differences between the planned outcome and the actual results for WILDWOOD CREATIONS for the period July 2015 to June 2016.

Prepare a profit reconciliation of planned versus actual profit by quantifying, in dollar terms, all significant factors.

Prepare a revised budget using all the previous planning assumptions, but use the total actual number of jobs that WILDWOOD CREATIONS company worked on during the year July 2015 to June 2016. In essence create a flexible budget based on the actual number of jobs worked on.

Consider how the different compensation (salaries, wages) arrangement of the company affect profit?

What changes should Dekkan and his partners consider making based on the results of your analysis.

[1] Dr. W. Motyka 2016. All rights reserved.

[2] Flat-fee: means a fee amount that does not change no matter how much the cost of the item eventually turns out to be.

1 Sydney Campus (Elizabeth St) PACC6001 MANAGEMENT ACCOUNTING 2016 - Semester 2 ASSGNMENT: TEAM STUDY This ASSIGNMENT is worth 20% of the total mark for the course. Students are required to undertake and complete this ASSIGNMENT-SUBMISSION. The ASSIGNMENT must be submitted by end of 3 OCTOBER 2016 through Blackboard The ASSIGNMENT shall be submitted with a completed pro-forma cover sheet. All of the ASSIGNMENT must be the work of the student TEAM only. Each member of the TEAM takes full (joint) responsibility for all the work submitted in the Assignment.The University's ethical requirements are to be complied with at all times. Students are advised not to postpone the commencement of their work on the ASSIGNMENT. PENALTIES FOR LATE SUBMISSION University policy is that an assessment item submitted after the due date, without an approved extension, will be penalised at a rate of 10% per day of the possible maximum mark for the assessment item for each day or part day that the item is late. Weekends count as two days in determining the penalty. Assessment items submitted more than five days after the due date will be awarded zero marks. ASSESSMENT OF TEAM STUDY Each submitted TEAM ASSIGNMENT will be assessed from a maximum score of 20 marks. The assessment will be based on the content and presentation. Students are advised not to postpone the commencement of their work on the ASSIGNMENT. RECORDS Students are advised to ensure that they retain a copy of the ASSIGNMENT submitted by them. Also they should retain their working papers, drafts and files until after the Course result is known. PRESENTATION It is important to read the file Guidelines for Writing Executive Reports 2016 on Blackboard. The structure of the submitted ASSIGNMENT must comprise: (i) an Executive Report, in proper format, which must not be more than two 2 (ii) (iii) typed pages (double spaced, 12 pitch); and an APPENDIX with any supporting materials, schedules, tables, diagrams or extended analyses related to and supporting the Executive Report. These are to be labelled as an 'Appendix ...' unless otherwise required. All materials in the Appendix must be in proper format and properly labelled. The ASSIGNMENT shall be submitted with a pro-forma cover sheet from the Newcastle Business School that is signed by the students in the Team. Useful guides for students in developing a report Executive Report) and report writing skills are to be found in the following publications as well as in the Auchmuty Library's referencing and citation guide on the internet site, http://www.library.newcastle.edu.au/resources/citation.html For this ASSIGNMENT students are required to write an Executive Report that summarises the outcomes of your analysis and any recommendations. You can add as Appendices any number of supporting schedules and detailed workings that you feel are relevant to supporting the content of your Executive (Summary) Report. Both the Executive Report and the supporting appendices are to be properly formatted, labeled and set out e.g. client's name, period covered by analysis, key objectives. The appendices are to be numbered sequentially with a heading that reflects the nature of the Appendix. The Appendices should have the detailed worksheets and calculations. Only the key outcome(s)/conclusions arising from them are brought into the Executive Report (if sufficiently relevant) with a reference to the relevant Appendix which contains the supporting details. The structure of the Executive Report is to comprise: (i) a concise introductory section that pinpoints the objective and scope of the Report; (ii) the main section should be devoted to the analysis conducted and its outcomes and implications. (iii) Finally, a brief conclusion section that would contain any recommendations arising from the analysis. The Executive Report is not an essay, thus the presentation must be concise (brief) and focus on the main relevant-to-the-objectives features (minor features and extended explanations can be dealt with in the Appendix). On the other hand, the Executive (Summary) Report is NOT simply a listing of 'bullet points'. A narrative (showing the reasoning) is necessary in order to communicate logically and concisely the main features/outcomes of the detailed analysis undertaken. The \"Gold Guide\" is designed to assist you to understand and meeting academic requirements, by summarising important points and providing website links. It gives you essential information on the basics of academic writing and critical thinking, essay writing, referencing, business reports, presentations and teamwork. The referencing style in the \"Gold Guide\" is APA style which is the Faculty standard for Business courses. An electronic copy of the Gold Guide is available. Also refer to: the separate pdf file containing detailed Guidelines on how to compile, write and present a Report. The name of the file is - GUIDELINES FOR EXECUTIVE REPORT 2016 Dr. W. Motyka 3 WILDWOOD CREATIONS Ltd1 Sam Dekkan, a part owner of the WILDWOOD CREATIONS Ltd, a maker, repairer and restorer of wooden outdoor entertainment furniture, was responsible for setting the charges for various kinds of repairs. A potential customer had called to inquire about the cost to repair an outdoor set of chairs. Dekkan gave an estimated price for the job, after which the woman thanked him and let him know that she would be going elsewhere - a competitor. Dekkan was aware that competition was increasing not only from the repair market but from the manufacturer of outdoor furniture with their low prices for new furniture. To attract repair jobs and avoid layoffs, Dekkan and his partners had lowered prices for minor repairs for the first time in a decade. Dekkan had once again looked at the budgeted and the actual Operating Profit statement. How could he tell what portion of the company's profits were due to the price decreases and how much was related to other factors? BACKGROUND WILDWOOD CREATIONS Ltd is a small shop-factory that specialises in repairing, restoring and making (a standard design) outdoor table and small entertainment furniture. SERVICES Currently, WILDWOOD CREATIONS offers four main services: major repairs, minor repairs, making a variety of new outdoor furniture: tables, bench seats, chairs, outdoor coffee tables, small storage cabinets. It uses its standard designs and can also adapt those designs for customer preferences (size, colour, height, material variations); restoring used outdoor furniture brought in by customers (however, not restoring antique furniture), Historically, minor furniture repair jobs were billed at a rate of $65.00 an hour. The minor repairs of furniture pieces was carried out by the four full-time salaried employees. In addition, Rush-jobs for minor repairs were occasionally performed for local customers only. These jobs were sub-contracted to a group of people who were retired employees of the WILDWOOD CREATIONS. They carried out the repairs for $27 an hour. Rush jobs were charged under flat-fee arrangements that averaged $160 per job. Usually, the average time that a Rush-job took was three hours to complete. Major repairs and restorations were performed under individual flat-fee 2 agreements that were quoted to customers based on the type of work needed for each piece of furniture. The three owners of WILDWOOD CREATIONS's as well as their four employees carried out all the major Repair Jobs as well as making new furniture in the shop-factory facilities. THE ANNUAL OPERATING COSTS 1 Dr. W. Motyka 2016. All rights reserved. Flat-fee: means a fee amount that does not change no matter how much the cost of the item eventually turns out to be. 2 4 Before the start of the current year under review (July 2015 to June 2016), Dekkan's accountant had prepared the annual operating plan for the business [SCHEDULE 1] in the APPENDIX. WILDWOOD CREATIONS' business was small and relatively straightforward, which made it possible to develop the company's operating budget using specific volume and revenue data for each product-service area. The following information was used in preparing the annual plan for July 2015 - June 2016: 1. Based on earlier years' work orders (2014-2015), the business was expected to carry out the following number of jobs in the July 2015 - June 1016 year: a. 390 major repairs Jobs; 1,830 minor repairs Jobs; 540 restoration Jobs; also, the company expected to receive order to make and sell 520 standard new outdoor tables. In addition, it expected to take on 50 rush repair jobs. b. The average major repairs Jobs were to be charged a price of $450 per Job. The average major repair Job was expected to take an average four hours to complete. c. The minor repair Jobs were to be quoted the price of $320, respectively. The minor repair Job work was expected to take an average of two hours to complete. d. The sale price of standard new outdoor tables was expected to average $680 per table. 2. All three partners were to be paid an annual base salary of $60,000 plus bonuses of 5% based on the total sales revenue of the company for year July 2015 to June 2016. 3. The hourly wage rate for (wages) employees was to be $28 an hour for work done. 4. The four salaried employees are paid an annual base salary of $43,000. 5. Replacement parts and other supplies were budgeted at $120 for each major job and $47 for each minor job (including Rush jobs). This estimated cost was based on experience. The making of new tables requires various materials that combined represent an expected cost of $140 per table. 6. Approximately 35% of the furniture repair Jobs that WILDWOOD CREATIONS worked on were transported to the shop-factory from outside of the city. The company expected to incur average transportation charges of $38 per package to transport the repaired furniture pieces back to their owners after the work was completed. 7. The budgeted advertising, depreciation, office rent, and miscellaneous expenses were treated as fixed expenses. ACTUAL RESULTS FOR THE YEAR At the end of the year (June 2016), Dekkan's accountant prepared the actual Operating Profit statement shown in the last column of SCHEDULE 1. Although Dekkan knew that WILDWOOD CREATIONS had experienced significant changes during the past year, he was still shocked to discover that the company's profit was $2,917 less than the 5 budget for that year even though revenues had increased by $55,390. In order to understand fully the decrease in profits, Dekkan gathered the following information: 1. Owing to increased competition, major repairs were billed at $60 an hour. 2. The planned and the actual number of Jobs as well as the average hours per job are presented in SCHEDULE 2 in the Appendix. 3. On average, major repairs and restorations required more replacement parts than in past years. The replacement parts expenses for major repairs Jobs were $120 per job for the year, while for minor repair Jobs the cost was $47. The materials for new tables was $140 per table. 4. The transportation-delivery expenses were $38 per package. 5. Advertising expenses were $2,000 more than budgeted owing to an unplanned printing of flyers for the new standard design table that was now available. 6. Miscellaneous expenses, however, were $900 less than the budgeted amount. REQUIRED Analyse the information about the activities and financial performance WILDWOOD CREATIONS Ltd. Prepare an Executive Report of no more than 2 pages for the owners of Wildwood Creations, setting out the overall outcomes and conclusions of your analysis which addresses the following listed requirements and issues. The two page report is to be in proper format, structure and style, and is to be accompanied by relevant Appendices. The Appendices of relevant Schedules are to be in a proper presentation format, and structured to show the relevant calculations that support your analysis. There is no limit on the number of schedules/tables/workings that the APPENDIX contains. However, these schedules/tables and workings must be clearly formatted and understandable. Suggestions: 1. Prepare a schedule showing the differences between the planned outcome and the actual results for WILDWOOD CREATIONS for the period July 2015 to June 2016. 2. Prepare a profit reconciliation of planned versus actual profit by quantifying, in dollar terms, all significant factors. 3. Prepare a revised budget using all the previous planning assumptions, but use the total actual number of jobs that WILDWOOD CREATIONS company worked on during the year July 2015 to June 2016. In essence create a flexible budget based on the actual number of jobs worked on. 4. Consider how the different compensation (salaries, wages) arrangement of the company affect profit? 5. What changes should Dekkan and his partners consider making based on the results of your analysis. 6 APPENDIX WILDWOOD CREATIONS Ltd SCHEDULE 1 Schedule of Planned versus Actual Operating Results Total Revenue Costs: Owner Salaries - base Owner Salaries - bonus Major repairs: salaries Minor Repairs: wages employees Rush Jobs: wages Materials for new tables Replacement parts Transportation Contribution Advertising Depreciation Office Rent Miscellaneous Operating Profit for the year July 2015 to June 2016. Budget Actual $947,800 $1,003,190 $180,000 $47,390 $102,480 $172,000 $4,050 $72,800 $224,400 $44,289 $847,409 $100,391 $180,000 $50,160 $151,032 $172,000 $4,455 $75,600 $224,945 $43,824 $902,016 $101,174 $15,000 $6,000 $52,000 $8,200 $81,200 $17,000 $6,000 $54,600 $7,300 $84,900 $19,191 $16,274 SCHEDULE 2: BUDGET and ACTUAL VOLUMES and input standards WILDWOOD CREATIONS: JOB Type Major repairs (salary) Data for July 2015 to June 2016 Budgeted Budgeted ACTUAL volume hours volume No. of No. of Jobs per job Jobs Actual hours per Job 390.00 7.00 450.00 7.00 1,830.00 2.00 1,740.00 3.10 Restoration jobs (salary) 540.00 6.00 510.00 7.50 Making of new Furniture (salary) 520.00 14.00 540.00 13.00 50.00 3.00 55.00 2.80 Minor Repairs (wages employees) Rush-jobs (minor) repair outsourced 3,330.00 3,295.00