“Charley’s Family Steak House (B)” Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

“Charley’s Family Steak House (B)” Case Study Analysis

Introduction

The “hospitality business” is a general class of fields inside the assistance business that integrates lodging, food and drink organization, event orchestrating, entertainment, travel, and the movement business. Charley's Family Steak House is a cordiality industry that is known for having a lovely air, quick and respectful help, superior grade, newly pre-arranged food, and sensible costs. It has great significance in the surroundings.

In this case, we would discuss the situation with Alex Pearson, who is a manager for Unit number two of Charley’s Family Steak House. Pearson is looking forward to meeting with Charley turner who is the owner of the company. In the meeting, Pearson would have to present details regarding the performance of his unit for the year2008. Pearson has been appointed as the manager of this unit in the current year. In the meeting Turner will be announced to give a bonus to Pearson equaling 25% of his salary, this reward would be completely based upon the performance of the Unit under Pearson. To get the bonus, Pearson requires to present good details of his performance. The case highlights the performance of Pearson regarding the company performance and the budget plans that are used by Pearson.

Problem Statement

After being promoted as a manager to Unit no. 2 in the year 2008, Pearson had a meeting with Turner, in the meeting both made a budget for the unit for the year 2008. The budget included all the details about expected expenses and sales of the unit in the year 2008. According to Pearson, the Gross sales figure that they used in the plan were quite aggressive.

Now that the year has ended, and Pearson is expected to get a bonus, he knows that the decision regarding his bonus is primarily based on the budget that he made along with Turner. The problem here is that the Profit and Net sales that they both were expecting and based on which they made the budget, the actual figures turned out to be very low than that. Now to get the bonus, Pearson has to be very reasonable with Turner. Because in the meeting Turner would ask him about the performance of his unit, in terms of their profit goals and the expenses.

Case Analysis

Question No. 1

The cordiality business is a general class of fields inside the assistance business that integrates lodging, food, event orchestrating, carnivals, travel, and the movement business. Adaptable spending plans are critical in the accommodation business in light of the fact that with adaptable financial plans the business is ceaselessly reviving its projections and cost controls with current information. The fundamental advantage of versatile spending plans over static ones is the ability to conform to the progressions actually.

A flexible budget is a type of budget in which we use different sizes of revenues or sales. Then the impact of different volumes of revenues over different accounts of the income statement is determined.For monetary control purposes, a firm readies an adaptable spending plan toward the finish of a period when the all-out work done or the genuine result level for the period is known. (Harris, 2012) Analyzed to the customary arranged technique, the adaptable spending plan is more significant. It utilizes genuine gross sales, real net deals, and genuine quantities of dinners. This demonstrates the information on adaptable spending plans is much more exact than standard ones. It shows where appraisals were not an accurate representation In this case when the original budget was prepared for Unit no. 2, the gross sales volume was considered to be 1,861,860. However, the actual gross sales for the unit turned out to be more than that of the expected, i.e. 1,936,025. This volume change would have a definite impact on the different expenses of the unit, because of which the actual expenses would differ from the planned. However, in this case, Pearson has made a flexible budget for his unit by using the actual volume of the gross sales. By doing so he would be able to incorporate its impact over different expense and costs accounts and ultimately over the profit. By comparing his flexible budget to the actual operating income statement, he would be able to give reasonable explanations regarding the variable of expenses and the profit to Turner.

By using the actual figure of gross sales, we have prepared a revised flexible budget for the unit. Based on that figure, the expense figures are also revised in the budget plan. From the revised budget it could be seen that the expenses that were expected in the original budget have changed. Most of the expenses like Food, Other operating expenses, Advertising expenses, etc. have increased in the calculated flexible budget as compared to the original budget. These increased costs and expenses have decreased the profit of the company if it is compared to the actual profit......................

“Charley’s Family Steak House (B)” Case Study Analysis

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