Page 7 - CIMA MCS Workbook August 2018 - Day 2 Tasks

Chapter 8

MANAGEMENT ACCOUNTING (P1)

PRACTICE TASKS

EXERCISE 1 (BUDGETING)

TRIGGER

This morning Steven Potter sent you the following email:

To: You
From: Steven Potter (Finance Manager)
Subject: Appraising gym managers

Nicola Collette has asked me to look at how we assess the performance of gym managers and at
what level of participation is appropriate.

Appraising managers
As you may be aware, gym managers are currently appraised monthly on the basis of gym
revenue but I am proposing that they get assessed on both the total number of members and gym
operating profit, calculated as per the attached schedule.

Targets will be set by head office based on the results of a typical gym of similar size and location
plus 10%.
Fee setting

Linked to this, the current system is that gym managers have complete freedom to set fees but I
think we should have more standardisation, so am proposing that standard fees are set centrally
and then gym managers have scope to vary their fees locally from the agreed figure by up to 5%.
I am going to be giving a presentation to Collette and Ethan Henson on this proposal but would
appreciate your thoughts first, so could you prepare me some briefing notes covering the
following:
• Advantages and disadvantages of my new approach for performance appraisal compared to
the current system
• Advantages and disadvantages of my suggestion for fee setting

Many thanks

TASK

Prepare an email addressing Steven’s points.

(Time allocation: 36 minutes)

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