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3 Bridgewater Co provides training courses for many of the mainstream software packages on the market.
The business has many divisions within Waterland, the one country in which it operates. The senior managers of
Bridgewater Co have very clear objectives for the divisions and these are communicated to divisional managers on
appointment and subsequently in quarterly and annual reviews. These are:
1. Each quarter, sales should grow and annual sales should exceed budget
2. Trainer (lecture staff) costs should not exceed $180 per teaching day
3. Room hire costs should not exceed $90 per teaching day
4. Each division should meet its budget for profit per quarter and annually
It is known that managers will be promoted based on their ability to meet these targets. A member of the senior
management is to retire after quarter 2 of the current financial year, which has just begun. The divisional managers
anticipate that one of them may be promoted at the beginning of quarter 3 if their performance is good enough.
The manager of the Northwest division is concerned that his chances of promotion could be damaged by the expected
performance of his division. He is a firm believer in quality and he thinks that if a business gets this right, growth and
success will eventually follow.
The current quarterly forecasts, along with the original budgeted profit for the Northwest division, are as follows:
Q1 Q2 Q3 Q4 Total
$’000 $’000 $’000 $’000 $’000
Sales 40·0 36·0 50·0 60·0 186·0
less:
Trainers 8·0 7·2 10·0 12·0 37·2
Room hire 4·0 3·6 5·0 6·0 18·6
Staff training 1·0 1·0 1·0 1·0 4·0
Other costs 3·0 1·7 6·0 7·0 17·7
––––– ––––– ––––– ––––– ––––––
Forecast net profit 24·0 22·5 28·0 34·0 108·5
––––– ––––– ––––– ––––– ––––––
Original budgeted profit 25·0 26·0 27·0 28·0 106·0
Annual sales budget 180·0
––––– ––––– ––––– ––––– ––––––
Teaching days 40 36 50 60
Required:
(a) Assess the financial performance of the Northwest division against its targets and reach a conclusion as to
the promotion prospects of the divisional manager (8 marks)

The manager of the Northwest division has been considering a few steps to improve the performance of his division.
Voucher scheme
As a sales promotion, vouchers will be sold for $125 each, a substantial discount on normal prices. These vouchers
will entitle the holder to attend four training sessions on software of their choice. They can attend when they want to
but are advised that one training session per quarter is sensible. The manager is confident that if the promotion took
place immediately, he could sell 80 vouchers and that customers would follow the advice given to attend one session
per quarter. All voucher holders would attend planned existing courses and all will be new customers.
Software upgrade
A new important software programme has recently been launched for which there could be a market for training
courses. Demonstration programs can be bought for $1,800 in quarter 1. Staff training would be needed, costing
$500 in each of quarters 1 and 2 but in quarters 3 and 4 extra courses could be offered selling this training. Assuming
similar class sizes and the usual sales prices, extra sales revenue amounting to 20% of normal sales are expected
(measured before the voucher promotion above). The manager is keen to run these courses at the same tutorial and
room standards as he normally provides. Software expenditure is written off in the income statement as incurred.
Delaying payments to trainers
The manager is considering delaying payment to the trainers. He thinks that, since his commitment to quality could
cause him to miss out on a well deserved promotion, the trainers owe him a favour. He intends to delay payment on
50% of all invoices received from the trainers in the first two quarters, paying them one month later than is usual.
Required:
(b) Revise the forecasts to take account of all three of the proposed changes. (7 marks)
(c) Comment on each of the proposed steps and reach a conclusion as to whether, if all the proposals were taken
together, the manager will improve his chances of promotion. (6 marks)
(d) Suggest two improvements to the performance measurement system used by Bridgewater Co that would
encourage a longer term view being taken by its managers. (4 marks)
(25 marks)
 
 

 

好几个网站的每日一练，从08年到现在都是这个....