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(solution) I want solution of this case study with calculations.

I want solution of this case study with calculations.



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?




WILDWOOD CREATIONS Ltd is a small shop-factory that specialises in repairing,


restoring and making (a standard design) outdoor table and small entertainment furniture.




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




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-fee2 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. 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.




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 (Master Budget) for July


2015 ? June 2016:


1. Based on earlier year?s 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 an order to make and sell 520 standard new


outdoor tables.


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


b. The major repairs Jobs were to be charged an average price of $450 per Job.


Major repair Jobs were expected to take an average seven hours to complete.


c. The repair jobs that were in fact restoration jobs work were to be quoted at a


price of $320 per job;


d. The fee for Minor repairs is based on hours worked and is $65 per hour. The


minor repair Job work was expected to take an average of two hours to




e. 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




7. The budgeted advertising, depreciation, office rent, and miscellaneous expenses


were treated as fixed expenses. 5 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:


1. Owing to increased competition, major repairs were billed at $440 per job, while


minor repairs jobs were billed at a fee of $60 per 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.




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




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. 6 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. 7 APPENDIX


WILDWOOD CREATIONS Ltd SCHEDULE 1 Schedule of Planned versus Actual Operating


Results Total Revenue




Owner Salaries - base


Owner Salaries - bonus


Major repairs: salaries


Minor Repairs: wages employees


Rush Jobs: wages


Materials for new tables


Replacement parts










Office Rent


Miscellaneous Operating Profit for the year July 2015 to June 2016.








$1,003,190 $180,000


















$100,391 $180,000


















$101,174 $15,000








$81,200 $17,000








$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














No. of


No. of Jobs


per job


Jobs Actual




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


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Sep 13, 2020





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