The largeretailers insist on low margins and are very slow to settle their debts.
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Hawk sells 65% of its output to large retail chains such asMotorcycle City and Carnells, exports 25% to the USA and Japan, andsells the remaining 10% to individuals who contact the company directly.The latter group of customers specify their requirements for a made tomeasure suit (they are often professional racers whose suits must beapproved by the authorities such as the Auto Cycle Union). These are aimed primarilyat motorcyclists, although a few items are sold as fashion garments. Hawk Leathers Ltd ("Hawk") is a company based in the UK thatemploys around 60 people in the manufacture and sale of leather jackets,jeans, one and two piece suits, and gloves. (B)* – each KPI score value is positive (+) where the 20X8 valueshows an improvement over the previous year OR negative (–) where the20X8 value shows poorer performance than in the previous year.Įach KPI score value is the % increase (+) or decrease (–) in 20X8 as appropriate
Staff bonus calculation for the year ended 30 November 20X8 using KeyPerformance Indicators (KPI's) based on relative contract factors
Customer complaint related costs are expected to rise to $0.25m. Initial survey and analysis costs on customer enquiries will remain at the 20X8 average cost per enquiry. Remedial work on orders will total $1m for material, labour and overhead costs. Cost of sales ($) will rise by 10% from the 20X8 actual total to allow for the combined effect of volume and price changes. The training cost allowance would be reduced to $3m. The marketing cost allowance would be reduced to $7.2m. The number of orders received and processed will be 11,000 (with average price levels remaining as per 20X8 actual price levels) from an initial total of 15,500 customer enquiries. It is estimated that the budgeted profit requirement of $20m will be achieved as a consequence of the following: Proposed strategy for Alpha division for year to 30 November 20X9 Note 4: investigation & action on complaints. Note 2: following inspection by surveyors after work implemented Note 1: includes materials, wages/salaries, vehicle and machine costs, etc Table A - Summary of financial and other operating information Note: Your answer should include specific examples from the data contained in the question to illustrate your discussion. (a) Evaluate the extent to which the budget ofAlpha division for the year ending 30 November 20X9 is achievable andconsistent with the 'beyond budgeting' philosophy detailed above. (3) Action planning that focuses on a strategy to achieve continuous value creation for the group.Īs an incentive to the overall achievement of goals and thecreation of 'value', a set of KPI's (key performance indicators) will beintroduced in 20X9 and used on the basis of the data in Table C.ĭivisional staff will be paid a bonus as a percentage of salarybased on the overall weighted percentage score deduced from the analysisas per table C. (2) Evaluation and rewards at each division based on relative improvement contracts (with hindsight). (1) Setting 'stretch goals' aimed at relative improvement and avoiding dysfunctional decision-making. RRR plc has, however, decided that in line with current 'beyondbudgeting' philosophy, each division should follow a number of adaptiveprocesses including the following: The management of Alpha division hasprepared the strategy shown in Table B as the framework for theachievement of the budget profit requirement for the year to 30 November20X9. RRR has given Alpha division a budgeted profit requirement of $20mfor the year to 30 November 20X9. Table A shows actual results for Alpha division for the yearsending 30 November 20X7 and 30 November 20X8, together with datarepresenting an average of a number of similar competitor companydivisions. This budget is currently used for planning and reporting. RRR expects divisional management to prepare its own annual budgetby focusing on the achievement of a net profit figure set at grouplevel. RRR operates alarge number of regional divisions, each of which offers a similar rangeof services. The RRR Group (RRR) provides roof repair, refurbishment and renewalservices to individual customers on a nationwide basis.
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