Identify the costs the organization might have some control over and the costs over which they have no control. How may the control over the controllable costs be improved?

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Controllable Costs

Young People Past Time Association is a social association whose objective is to keep youngsters effectively occupied. This association runs a tennis coaching program for those who are interested. Being a non-profit organization and being funded by grants from different levels of government authorities It is charges for coaching are very affordable to many youngsters. Being accountable for public money, the association is concerned with the lack of control over the costs that relate directly to the coaching program.

For the coaching program courts are hired from the local council. The hire fees paid are directly related to the activities. The rate paid to tennis coaches hired on a need basis are higher than booking them on a continued basis. The coaches are hired based on demand for their services and not on a permanent basis. Many tennis balls are lost particularly by beginners as they hit the ball wildly.

As a fund raising activity and to assist the trainees, the association, as part of the tennis coaching program runs a shop. In the shop supplies are kept for sale includes tennis equipment and refreshments.

The association observes that some refreshments go out of date whereas others turn over very quickly.

The association wonders if their approach to hiring coaches as they need them s cost effective. They are also considering the erection of a temporary barrier around the courts used by beginners to limit the loss of balls.

Identify the costs the organization might have some control over and the costs over which they have no control. How may the control over the controllable costs be improved?

Case study fly, — Performance Report — Is it adequate?
Edward Sammons started a small store in a mining town. Though the business grew to be a departmental store (with four departments: furniture, hardware, drapery and clothing) during the mining boom it remained as a family business.
The business is currently managed by Robert Sammons. In recent years competition has increased and the business has been declining.
In fact, last year’s (2OXX) trading results showed a loss of $3000 for the first time as shown in the reports below

Income Statement

For the year ended 30th )june 2OXX
$‘ooo s’ooo
Sales 1,223
Less cost of goods sold 920
Gross Profit 303
Less Expenses
Departmental Wages 178
Departmental expenses 32
Advertising 36 6
Delivery expenses 12
Administration expenses 15
Miscellaneous expenses 7
Finance charges 3
Management fees 23 306
Net Loss 3


Departmental accounts for the year ended 30th June 2OXX
(Figures in ‘000s)
$‘OOO $‘OOO Sf000 $‘OOO
Furniture Hardware Drapery Clothing
Sales 452 265 196 310
Purchases 390 190 130 190
Opening stock 45 58 50 80
Closing stock 50 50 52 60
Wages 42 40 44 52
Expenses 9 7 7 9
Advertising 11 6 6 13
Selling floor space 40% 20% 10% 30%
At a meeting of shareholders, it was pointed out that the performance of some departments had been affected more adversely by competition than others. It was therefore suggested that one department be closed so that others could be expanded.
It was also suggested that selling prices may have to be increased, although this would make the firm less competitive.
. How suitable are the above reports (found on page 295) for making decisions on these suggestions?
. What other information would justify further consideration?
. Refer to any limitations to the form of the information given here.
Case study 12.1 — Designing meaningful report formats
Marcus Van Der Giessen, the manager of James Street Shoe Shop, feels that the reports he is presently receiving from his staff are not complete enough for his decision-making purposes. The report he received looks like the following:
Sales 900
Less cost of goods sold 540
Gross Profit 360
Less Operating Expenses 270
Net Profit 90

Marcus asks Virginia Warat, an expert in meaningful reports, to develop a useful reporting format for his use. You, being one of the employees of Virginia, are assigned to the task. After studying the current report you recommend to Virginia:
. An improved format to the report creator to insert the actual amounts of the fixed and variable cost portions of the relevant items so that Marcus can see them at a glance
. Further modifications to the report format if he also wishes to see at a glance the contribution margin in both money and percentage terms (the contribution margin is the difference between the sales value and all the variable costs of the organization).
Virginia sees the merits in these suggestions and asks you to go ahead with designing the reports.
You find on analysis of the accounting records of the business that the proportion of fixed costs to variable costs for the cost elements in the statement are:
Cost of goods sold: 25% fIxed; 75% variable Operating expenses
4O% fixed; 60% variable Show the following:
. how the two formats would look without figures
. how the formats would look with the appropriate figures inserted.

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