Accounting – Short Answer

Hello,

I hope you’re well. I need assistance with the following question for the attached brief case study:

a) What are the major issue(s) facing the company at the time of the case?

b) What were the factors that contributed to the difference between actual revenues and planned revenues for 2018? Quantify their impact on profit.

c) What other, if any, key performance indicators or information would you want to have when assessing the performance?

For the exclusive use of K. Kelley, 2023.
UV7971
Jan. 14, 2020
Boulevard Sandwiches, Inc. (B)
Alan Philips, manager of Boulevard Sandwiches, Inc., Unit No. 2, was anxious about how Carla Thomas,
the owner of Boulevard Sandwiches, Inc., would assess his performance now that he had completed his first
full year as manager. Unit No. 2 was one of four sandwich shops owned by Thomas under the Boulevard
Sandwiches name. Philips had previously worked as a full-time employee in the kitchen at Unit No. 1 and as
assistant manager of Unit No. 4. Thomas had moved him to Unit No. 2 as assistant manager in June 2017 and
promoted him to manager there in September 2017, after the previous manager retired.
Unlike the other three sandwich shops, Unit No. 2 was located in downtown Sandown, Virginia. In July
2018, a 100-room economy hotel with a pool but no restaurant opened within easy walking distance of the
sandwich shop. Except for a pizza place located across the street, there were no other eating establishments
within a half mile of Unit No. 2. Thomas considered it an excellent location.
In September 2018, Philips developed an express service innovation at Unit No. 2 for frequent lunchtime
customers who didn’t have much time to eat. It consisted of a quick-serve menu, prepaid meal cards, and a
separate ordering and payment line. This innovative service became very popular with people who worked in
the small downtown office buildings, and it enabled the sandwich shop to establish a regular lunchtime business
throughout the week.
Soon after his promotion to manager, Philips had met with Thomas to develop the 2018 profit plan for
Unit No. 2. Although the plan was not unreasonable, Philips viewed the sales projections as very aggressive.
Nevertheless, he felt confident he would find a way to meet the high expectations Thomas had for Unit No. 2
and for Philips as its manager. Besides, Thomas had informed him that she was considering implementing a
bonus system that would make Philips eligible to earn up to an additional 25% of his salary. Philips believed
the most important performance measure of the bonus program was likely to be the achievement of
predetermined annual sales and profit goals. However, he wasn’t sure what other performance factors might
be used, and he was never asked for his thoughts regarding the implementation of the new bonus plan. He
hoped to have an opportunity to make his views known when he met with Thomas later that week to review
the operating performance of Unit No. 2 for 2018.
In planning for his upcoming meeting, Philips had prepared an operating statement comparing the actual
results with the original plan for 2018 (see Exhibit 1). His task over the next few days was to prepare to explain
to Thomas why he thought both he and Unit No. 2 had performed extremely well in 2018, despite the fact that
the restaurant’s profit was substantially less than originally planned. Philips knew that Thomas would not be
pleased with Unit No. 2’s lower profit, particularly since actual gross sales volume was greater than expected
for the year.
This fictional case was prepared by Luann J. Lynch, Almand R. Coleman Professor of Business Administration, and Richard E. Brownlee, Dale S. Coenen
Professor Emeritus of Business Administration. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of
an administrative situation. Copyright  2020 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order
copies, send an email to sales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted
in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation. Our goal is to publish
materials of the highest quality, so please submit any errata to editorial@dardenbusinesspublishing.com.
This document is authorized for use only by Kacey Kelley in FA23 ACCT 6318 Analyzing Accounting Data for Strategic Decision Making (Internal) taught by Sharon Hsiao, Northeastern
University from Oct 2023 to Dec 2023.
For the exclusive use of K. Kelley, 2023.
Page 2
UV7971
Philips tried to think of all the factors that had affected Unit No. 2’s results for 2018, and he jotted them
down on a notepad (see Exhibit 2). In addition, he prepared a schedule of actual versus budgeted staff labor
hours and wages for the year (see Exhibit 3). He knew he had done a good job, and all he had to do now was
to convince Thomas. Doing so would entail responding to her two favorite questions: “How did actual sales
compare with planned sales?” and “How well were costs and expenses controlled?” Philips suspected that his
only hope for receiving a bonus was to prepare an explanation of the 2018 operating results for Unit No. 2 that
was comprehensive, logical, and very convincing.
This document is authorized for use only by Kacey Kelley in FA23 ACCT 6318 Analyzing Accounting Data for Strategic Decision Making (Internal) taught by Sharon Hsiao, Northeastern
University from Oct 2023 to Dec 2023.
For the exclusive use of K. Kelley, 2023.
Page 3
UV7971
Exhibit 1
Boulevard Sandwiches, Inc. (B)
Operating Statement
Gross Sales
Net Sales
Food
Labor
Other Operating Expenses
Advertising
Miscellaneous
Depreciation
Insurance
Licenses and Fees
Rent (Base)
Rent (Overage)
Management
Profit
2018 Actual
2018 Plan
$ 1,936,025
$ 1,726,725
1,025,870
185,800
152,450
78,625
3,320
24,000
9,780
10,940
72,000
6,801
98,000
$ 59,139
$ 1,861,860
$ 1,761,760
1,024,023
199,095
148,949
65,165
3,000
24,000
9,400
11,700
72,000
3,093
95,000
$ 106,335
4,025
50%
50%
$7.50
$6.50
$11.00
$10.00
3,850
40%
60%
$7.50
$7.00
$10.50
$10.00
Supporting Data
Average weekly customer count
% customers—lunch
% customers—dinner
Average gross check—lunch
Average net check—lunch
Average gross check—dinner
Average net check—dinner
This document is authorized for use only by Kacey Kelley in FA23 ACCT 6318 Analyzing Accounting Data for Strategic Decision Making (Internal) taught by Sharon Hsiao, Northeastern
University from Oct 2023 to Dec 2023.
For the exclusive use of K. Kelley, 2023.
Page 4
UV7971
Exhibit 1 (continued)
Operating Statement
Explanation of Items in Profit Plan
Gross Sales:
Total sales using menu prices. All menu prices remained the same during the year.
Net Sales:
Gross sales minus discounts that were mainly from coupon use. The coupons were good at
any of the four Boulevard Sandwiches locations.
Food:
The annual food cost in the plan was based on the expected total sales of each menu item
and the predetermined markup for that item. For 2018, food costs were expected to be 55%
of gross sales. Philips learned that the actual prices of food purchased by Thomas had been
about 2% below the level used in the plan.
Labor:
The annual labor cost varied by type of employee. Labor cost for cooks was expected to be
fixed, while labor cost for servers and cashiers was expected to vary with the number of
customers. Actual versus budgeted staff hours and wages for 2018 are shown in Exhibit 3.
Other Operating These included supplies, maintenance, and utilities. Philips thought they were driven
Expenses:
primarily by customer count, and the plan set them at 8% of gross sales.
Advertising:
Thomas managed the advertising for the four units. Of the 3.5% of gross sales included in
the plan, 0.5% was for use by the sandwich shop manager, 1% was for broadcast media, 1%
was for print media, and 1% was for ad preparation.
Miscellaneous:
A catchall for small items, mostly fixed, with some responding to customer-count variations.
Depreciation:
This represented straight-line depreciation on furniture, the POS system, and other
equipment.
Insurance:
This represented both property and liability insurance.
Licenses
and Fees:
This represented a combination of federal, state, and local business licenses and fees.
Some of the amount represented a corporate allocation.
Base Rent:
A fixed annual rent paid on the restaurant property.
Rent Overage:
A variable amount equal to 5.0% of the excess of actual gross sales above $1,800,000.
Management:
This consisted of the sandwich shop manager’s and assistant manager’s combined salary of
$55,000, a charge assessed to cover Thomas’s salary, and Unit No. 2’s portion of the
purchasing, accounting, and other service activities that occurred at corporate headquarters.
Source: All exhibits created by author.
This document is authorized for use only by Kacey Kelley in FA23 ACCT 6318 Analyzing Accounting Data for Strategic Decision Making (Internal) taught by Sharon Hsiao, Northeastern
University from Oct 2023 to Dec 2023.
For the exclusive use of K. Kelley, 2023.
Page 5
UV7971
Exhibit 2
Boulevard Sandwiches, Inc. (B)
Philips’s Notes for Unit No. 2
Sales Factors:
Number of customers
Customer lunch/dinner mix
Average gross check at lunch and dinner
Discount coupon usage
Expense Factors:
Food prices
Food usage
Labor rates
Labor usage
Spending variances
Exhibit 3
Boulevard Sandwiches, Inc. (B)
Schedule of Staff Hours and Wages
2018 Actual
2018 Plan
Kitchen Staff
Hours worked
Average wages per hour
8,000
$12.50
8,000
$13.00
Cashiers and Servers
Hours worked
Average wages per hour
26,400
$3.25
32,032
$3.00
This document is authorized for use only by Kacey Kelley in FA23 ACCT 6318 Analyzing Accounting Data for Strategic Decision Making (Internal) taught by Sharon Hsiao, Northeastern
University from Oct 2023 to Dec 2023.
For the exclusive use of K. Kelley, 2023.
UV7971
Jan. 14, 2020
Boulevard Sandwiches, Inc. (B)
Alan Philips, manager of Boulevard Sandwiches, Inc., Unit No. 2, was anxious about how Carla Thomas,
the owner of Boulevard Sandwiches, Inc., would assess his performance now that he had completed his first
full year as manager. Unit No. 2 was one of four sandwich shops owned by Thomas under the Boulevard
Sandwiches name. Philips had previously worked as a full-time employee in the kitchen at Unit No. 1 and as
assistant manager of Unit No. 4. Thomas had moved him to Unit No. 2 as assistant manager in June 2017 and
promoted him to manager there in September 2017, after the previous manager retired.
Unlike the other three sandwich shops, Unit No. 2 was located in downtown Sandown, Virginia. In July
2018, a 100-room economy hotel with a pool but no restaurant opened within easy walking distance of the
sandwich shop. Except for a pizza place located across the street, there were no other eating establishments
within a half mile of Unit No. 2. Thomas considered it an excellent location.
In September 2018, Philips developed an express service innovation at Unit No. 2 for frequent lunchtime
customers who didn’t have much time to eat. It consisted of a quick-serve menu, prepaid meal cards, and a
separate ordering and payment line. This innovative service became very popular with people who worked in
the small downtown office buildings, and it enabled the sandwich shop to establish a regular lunchtime business
throughout the week.
Soon after his promotion to manager, Philips had met with Thomas to develop the 2018 profit plan for
Unit No. 2. Although the plan was not unreasonable, Philips viewed the sales projections as very aggressive.
Nevertheless, he felt confident he would find a way to meet the high expectations Thomas had for Unit No. 2
and for Philips as its manager. Besides, Thomas had informed him that she was considering implementing a
bonus system that would make Philips eligible to earn up to an additional 25% of his salary. Philips believed
the most important performance measure of the bonus program was likely to be the achievement of
predetermined annual sales and profit goals. However, he wasn’t sure what other performance factors might
be used, and he was never asked for his thoughts regarding the implementation of the new bonus plan. He
hoped to have an opportunity to make his views known when he met with Thomas later that week to review
the operating performance of Unit No. 2 for 2018.
In planning for his upcoming meeting, Philips had prepared an operating statement comparing the actual
results with the original plan for 2018 (see Exhibit 1). His task over the next few days was to prepare to explain
to Thomas why he thought both he and Unit No. 2 had performed extremely well in 2018, despite the fact that
the restaurant’s profit was substantially less than originally planned. Philips knew that Thomas would not be
pleased with Unit No. 2’s lower profit, particularly since actual gross sales volume was greater than expected
for the year.
This fictional case was prepared by Luann J. Lynch, Almand R. Coleman Professor of Business Administration, and Richard E. Brownlee, Dale S. Coenen
Professor Emeritus of Business Administration. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of
an administrative situation. Copyright  2020 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order
copies, send an email to sales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted
in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation. Our goal is to publish
materials of the highest quality, so please submit any errata to editorial@dardenbusinesspublishing.com.
This document is authorized for use only by Kacey Kelley in FA23 ACCT 6318 Analyzing Accounting Data for Strategic Decision Making (Internal) taught by Sharon Hsiao, Northeastern
University from Oct 2023 to Dec 2023.
For the exclusive use of K. Kelley, 2023.
Page 2
UV7971
Philips tried to think of all the factors that had affected Unit No. 2’s results for 2018, and he jotted them
down on a notepad (see Exhibit 2). In addition, he prepared a schedule of actual versus budgeted staff labor
hours and wages for the year (see Exhibit 3). He knew he had done a good job, and all he had to do now was
to convince Thomas. Doing so would entail responding to her two favorite questions: “How did actual sales
compare with planned sales?” and “How well were costs and expenses controlled?” Philips suspected that his
only hope for receiving a bonus was to prepare an explanation of the 2018 operating results for Unit No. 2 that
was comprehensive, logical, and very convincing.
This document is authorized for use only by Kacey Kelley in FA23 ACCT 6318 Analyzing Accounting Data for Strategic Decision Making (Internal) taught by Sharon Hsiao, Northeastern
University from Oct 2023 to Dec 2023.
For the exclusive use of K. Kelley, 2023.
Page 3
UV7971
Exhibit 1
Boulevard Sandwiches, Inc. (B)
Operating Statement
Gross Sales
Net Sales
Food
Labor
Other Operating Expenses
Advertising
Miscellaneous
Depreciation
Insurance
Licenses and Fees
Rent (Base)
Rent (Overage)
Management
Profit
2018 Actual
2018 Plan
$ 1,936,025
$ 1,726,725
1,025,870
185,800
152,450
78,625
3,320
24,000
9,780
10,940
72,000
6,801
98,000
$ 59,139
$ 1,861,860
$ 1,761,760
1,024,023
199,095
148,949
65,165
3,000
24,000
9,400
11,700
72,000
3,093
95,000
$ 106,335
4,025
50%
50%
$7.50
$6.50
$11.00
$10.00
3,850
40%
60%
$7.50
$7.00
$10.50
$10.00
Supporting Data
Average weekly customer count
% customers—lunch
% customers—dinner
Average gross check—lunch
Average net check—lunch
Average gross check—dinner
Average net check—dinner
This document is authorized for use only by Kacey Kelley in FA23 ACCT 6318 Analyzing Accounting Data for Strategic Decision Making (Internal) taught by Sharon Hsiao, Northeastern
University from Oct 2023 to Dec 2023.
For the exclusive use of K. Kelley, 2023.
Page 4
UV7971
Exhibit 1 (continued)
Operating Statement
Explanation of Items in Profit Plan
Gross Sales:
Total sales using menu prices. All menu prices remained the same during the year.
Net Sales:
Gross sales minus discounts that were mainly from coupon use. The coupons were good at
any of the four Boulevard Sandwiches locations.
Food:
The annual food cost in the plan was based on the expected total sales of each menu item
and the predetermined markup for that item. For 2018, food costs were expected to be 55%
of gross sales. Philips learned that the actual prices of food purchased by Thomas had been
about 2% below the level used in the plan.
Labor:
The annual labor cost varied by type of employee. Labor cost for cooks was expected to be
fixed, while labor cost for servers and cashiers was expected to vary with the number of
customers. Actual versus budgeted staff hours and wages for 2018 are shown in Exhibit 3.
Other Operating These included supplies, maintenance, and utilities. Philips thought they were driven
Expenses:
primarily by customer count, and the plan set them at 8% of gross sales.
Advertising:
Thomas managed the advertising for the four units. Of the 3.5% of gross sales included in
the plan, 0.5% was for use by the sandwich shop manager, 1% was for broadcast media, 1%
was for print media, and 1% was for ad preparation.
Miscellaneous:
A catchall for small items, mostly fixed, with some responding to customer-count variations.
Depreciation:
This represented straight-line depreciation on furniture, the POS system, and other
equipment.
Insurance:
This represented both property and liability insurance.
Licenses
and Fees:
This represented a combination of federal, state, and local business licenses and fees.
Some of the amount represented a corporate allocation.
Base Rent:
A fixed annual rent paid on the restaurant property.
Rent Overage:
A variable amount equal to 5.0% of the excess of actual gross sales above $1,800,000.
Management:
This consisted of the sandwich shop manager’s and assistant manager’s combined salary of
$55,000, a charge assessed to cover Thomas’s salary, and Unit No. 2’s portion of the
purchasing, accounting, and other service activities that occurred at corporate headquarters.
Source: All exhibits created by author.
This document is authorized for use only by Kacey Kelley in FA23 ACCT 6318 Analyzing Accounting Data for Strategic Decision Making (Internal) taught by Sharon Hsiao, Northeastern
University from Oct 2023 to Dec 2023.
For the exclusive use of K. Kelley, 2023.
Page 5
UV7971
Exhibit 2
Boulevard Sandwiches, Inc. (B)
Philips’s Notes for Unit No. 2
Sales Factors:
Number of customers
Customer lunch/dinner mix
Average gross check at lunch and dinner
Discount coupon usage
Expense Factors:
Food prices
Food usage
Labor rates
Labor usage
Spending variances
Exhibit 3
Boulevard Sandwiches, Inc. (B)
Schedule of Staff Hours and Wages
2018 Actual
2018 Plan
Kitchen Staff
Hours worked
Average wages per hour
8,000
$12.50
8,000
$13.00
Cashiers and Servers
Hours worked
Average wages per hour
26,400
$3.25
32,032
$3.00
This document is authorized for use only by Kacey Kelley in FA23 ACCT 6318 Analyzing Accounting Data for Strategic Decision Making (Internal) taught by Sharon Hsiao, Northeastern
University from Oct 2023 to Dec 2023.