Olympic Wash is owned by Bob, who oversees the entire operation, also handles sa

Question

Olympic Wash is owned by Bob, who oversees the entire operation, also handles sales and marketing and works to prepare the 2013 budget with his company controller Christy Smith. They offer three different types of car washes: Bronze for $8, Silver for $12, and Gold for $21. Each wash includes different services.

Christy reported that the sales for 2012 were 9,400 washes of Bronze, 8,000 washes of Silver, and 6,700 of Gold. After every car wash each customer is given a card and is encouraged to respond to the short customer satisfaction survey about the service they received. Bob strives to maintain at least a 94% customer satisfaction rating and at the end of every year rewards his employees with a $100 bonus for ever percentage above 94% in comparison to the total customer satisfaction rating for the year.

They came to the conclusion that through a 10% increase in advertisement (PY $2,300) and encouragement they would see a growth in Silver by 15% and growth in Gold by 10%, with decrease of 10% in Bronze. With this increase in sales and time it takes to perform the higher level car washes, they figured they would have to hire an additional employee to help assist in the washing.

Some facts to consider for 2013:
Salary and bonuses for the Bob and Christy are set at $95,000 plus a 5% bonus on any profit made.
Discounts are calculated at 2% of gross sales.
Direct material costs for per wash for 2012 for Bronze washes = $2, Silver = $3, and Gold =$5. For 2013 they anticipate that Direct Material costs per wash will remain the same.
Car wash employees have wages of $8/hour plus any tips received. There are currently 6 car wash employees in which it is anticipated that each employee will work for a total of 2,000 hours a year (40 hour weeks with one week vacation and one week of sick time unpaid).
After every 100 car washes hose valves have to be changed. These valves cost $8 to replace.
Anticipating a customer satisfaction rating of 96%.

Yearly rent = $10,000
Insurance Premium = $3,000
Depreciation = $3,000
Miscellaneous Expenses = $1,600
Utilities Expense = $3,400
Other Operating Expense = 2% of Gross Sales

Assist Bob and Christy in preparing the operating budget for 2013. Please include calculations.

Olympic Wash (A) OPERATING BUDGET 2013 Budget 2013 Sales Budget Worksheet: Unit Count (Washes) Bronze Silver Gold Budget Totals Gross Sales Total Units (2012) 2 3 5 (Less) Discounts-Coupons Budget Increase (decrease) Net Sales Budget-2013 Materials Average Price Labor Budget Gross Sales by Type Values Less-Ave. Discount-Coupons Other Oper Expenses Budget Net Sales by Type Gross Profit Net Ave. Price Advertising Rent Cost Budget Worksheet: Insurance Material Depreciation Other Operating Expenses Miscellaneous Advertising (PY 2,300) Utilities (Non-Operating) Valves Salaries Mngmt Labor: Total Expenses Number of Employees Profit before Bonus Number of Hours, Each Management Bonus Total Hours Employee Bonus Rate Profit Total Labor Cost

Explanation / Answer

* Total hours is hours for which payment is made. (total hours worked + total hours of Paid vacation), as sick leave of 40 hours is unpaid hence total hours per employee = 2000+40 = 2040

Note: It is given that for satisfaction above 94% will be rewared with bonus of $ 100 for every %. Given case Satisfaction is 96%

Therefore, Bonus = 2*$100*7 no. of employee = $ 1,400

Sales Budget worksheet Particulars Bronze Silver Gold Total Remakrs/Working Total Units (2012) 9,400 8,000 6,700 24,100 Given Budget Increase/(Decrease) -10% 15% 10% Budget 2013 8,460 9,200 7,370 25,030 Average Price $8 $12 $21 Budget Gross Sales 67,680 1,10,400 1,54,770 3,32,850 Less Avg Disc Coupon (2%) 1,354 2,208 3,095 6,657 Gross sales * 2% Net Average Price 7.84 11.76 20.58 Material Cost 2 3 5

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.