Fitworx Leisure Centre: Operational Performance and Financial Control

This report analyzes the operational performance and financial management of the Fitworx Leisure Centre, focusing on the swim school. It begins by examining the operational performance using the four steps of monitoring, including establishing where monitoring is needed, establishing the measures, comparing data, and taking action. The report uses the provided case study data to analyze the swim school's revenue, costs, and customer volumes, highlighting the importance of cutting costs, improving quality, and increasing sales. A run chart is suggested as an effective monitoring tool. The second part of the report focuses on financial monitoring, including variance analysis (income statement), trend analysis, and sales variance analysis. The report identifies variances, analyzes their causes (such as technology, processes, labor issues and advertising), and suggests corrective actions, such as advertising campaigns to increase revenue. The report demonstrates how to control activities, make sure they are proceeding according to plan and take corrective action when they don't.

Operational Performance1
Operational Performance
Student’s Name
Professor’s Name
Course Name
Date
C T F TASE S UDY - I WORX LEISURE C TEN RE ersion uneV 1 (J 2014) age ofP 1 2
is lai er rinted o ies of t is do u ent are regarded as un ontrolled lease eD c m : P c p h c m c . P ch ck tt sit tafens edu auh p:// www. w. . to ensure t is is t e latesth h
ersionv .

Operational Performance2
TASK 1 – MONITORING OPERATIONAL PERFORMANCE
The relevant approach when controlling and monitoring the costs incurred and expenditure
is determined by the structure, management style, size and nature of the organization. In this case
study, we have Fitworx which has different tabulations of the income statement divided into
annual sections, maintenance, expenditure, total base salary costs, swim school customer volumes
and swim school fees under the budget data section. The organization’s performance reports
indicate slight but progressive changes over the two compared fiscal years. To grasp the annual
financial implications within the performance reports, one has to compare the different annual
financial indications offered in the data collected (Berger, 2011). For instance, it is observable that
the revenue generated in Swim School Financial Data for the year ended in 30 June 2014 was
$306,405 compared to an increase in the following year of $366,862. Generally, the most
appropriate review of the operational performance would entail looking at the profit generated
over the two financial years which in this case was $2,126 and $21,179 in both 2014 and 2015
respectively. Therefore, it is notable that there was an increase in the net profit generated since
after deducting the total expenditure from the revenue generated then the above stipulated values
are generated (Berger, 2011).
Secondly, using the four steps of monitoring the organization’s performance reports an
appropriate comparison can be effectively analyzed. The initial step entails establishing where the
monitoring is needed and in this scenario the important sections of the operational plan should be
noted such as cutting costs, improving quality, increasing sales, employee productivity, and
customer satisfaction. Basing from the total annual staff costs increase from $210,000 to $262,500
it is appropriate to reduce this cost by deducting the salary of part time Instructor number 2 or
reducing the salary of the senior instructor thereby curbing overspending as observed from the
reduced number of 2014-15 (actual) customers compared to 2015-16 (budgeted) customers at 1959
and 1950 respectively. Furthermore, sales can be increased by reducing the cost swim school fees
C T F TASE S UDY - I WORX LEISURE C TEN RE ersion uneV 1 (J 2014) age ofP 1 2
is lai er rinted o ies of t is do u ent are regarded as un ontrolled lease eD c m : P c p h c m c . P ch ck tt sit tafens edu auh p:// www. w. . to ensure t is is t e latesth h
ersionv .

Operational Performance3
to attract more customers as observed with the general increase observed in both the nursery,
toddler, preschool and school age fees as indicated in the performance report. Generally, customer
volumes have slightly reduced as indicated in the 2015-16 (budgeted) at 1950 from 1959 the
previous fiscal year. Suppose the operation plan went wrong then the actual values of the financial
results generated would not be accurate and this would lead to poor organizational monitoring.
Therefore, the organization could realize losses generated from poor financial management plans
which could lead to closure of the business entity. The organization’s mission and vision are
supported with the above assertions since the whole analysis is focused in ensuring the entity is
capable of generating income and increasing the number of consumers whilst reducing the repair
and maintenance, salary and administrative costs.
The second step entails establishing the measures that should be monitored which need to
be focused on the total salary costs, customer volumes, administrative, repair and maintenance,
swim school fees, and the performance reports. The objectives of the operational plan will be met
once the total salary costs are analyzed and the increased payments over the years should be
marginalized to cater to the extra administrative, repair and maintenance costs. Notably, an
increase in customer volumes would guarantee that the administrative, repair and maintenance
costs would also increase thereby the total administrative costs which had reduced to $12,669 from
$21,520 in 2015-16 and 2014-15 respectively would need to be increased. Therefore, basing from
the data collected it is correct to ascertain that there had been a slight decrease in customer
volumes in the final year and this can be attributed to decreased maintenance, repair and
administrative costs. Furthermore, this could also be attributed to increased swim school fees
which could lead to a reduction in the number of subscribed consumers who prefer reduced swim
school fees as indicated in the previous year comparisons. Some of the lead indicators such as the
quality standards, performance standards, KPIs and goals can be measured over the three years to
generate a corrective measure. The goals of the entity are to generate profit and this can be
C T F TASE S UDY - I WORX LEISURE C TEN RE ersion uneV 1 (J 2014) age ofP 1 2
is lai er rinted o ies of t is do u ent are regarded as un ontrolled lease eD c m : P c p h c m c . P ch ck tt sit tafens edu auh p:// www. w. . to ensure t is is t e latesth h
ersionv .

Operational Performance4
indicated through the revenue generated or net profit/ loss. For instance, an increase in the revenue
generated over the two years indicated an increase of $60,457 in actual budgeting and the net
profit also increased by $19,053 which illustrates that the customer volumes had increased over the
two years as much as the budgeted value for 2015-16 had reduced by 9 total swim school
customers. Therefore, a decrease in the number of customer volumes by 9 indicates a 6/13%
reduction of the total consumers budgeted in 2015-16 from the total customers.
Thirdly, all comparisons should be conducted pertaining to the revenue generated,
maintenance and repair costs, customer volumes, administrative costs and total base salary costs.
For instance, the revenue generated in both 2014 and 2015 financial years had increased from
$306,405 to $366,892 respectively indicating growth in sales. Moreover, the maintenance and
repair costs also reduced from $22,500 to $19,800 and the budgeted value was expected to
increase to $20,300 in the final fiscal year indicating that increased customer volumes led to
increased repair and maintenance costs. The administrative costs also reduced from $14,617 to
$12,669 in the budgeted year which illustrates that total base salary costs were impacting the
administrative costs due to increased employee payments as illustrated in the performance reports.
The appropriate operational monitoring tool would be a run chart as it illustrates the change
in a measured characteristic such as consumer volumes over a set time period. For instance, the
consumer volumes had reduced in the budgeted year to 1950 as much as the initial value was 1705
in both 2015-16 and 2013-14 respectively. Therefore, the run chart would indicate both of these
values and illustrate the changes using a graph or chart to monitor the performance of consumer
volumes of time, identify the problem whether it is consumer or administrative generated, compare
performances and offer implementable solution measures, focusing on changes and identifying
other factors that influenced the result (Jordan, 2011). In this scenario, the entity would aim at
increasing consumer volumes, reducing the administrative, repair and maintenance costs and
increasing the revenue by reducing the expenditure to realize more profit.
C T F TASE S UDY - I WORX LEISURE C TEN RE ersion uneV 1 (J 2014) age ofP 1 2
is lai er rinted o ies of t is do u ent are regarded as un ontrolled lease eD c m : P c p h c m c . P ch ck tt sit tafens edu auh p:// www. w. . to ensure t is is t e latesth h
ersionv .

Operational Performance5
TASK 2 – MONITORING FINANCES
In the initial variance analysis (Income Statement) the Actual Value is subtracted from the
Budget value to obtain the variance (-$13,138). The trend continues up to the final value (-8179)
indicating that the fluctuating F values indicate an increase in volume of consumers in the
forthcoming budgeted year. The reasons for variance is lack of efficient technologies, poor
operational processes, labor issues and high production costs. It could also be due to poor
advertisement (Utts & Heckard, 2005).
In the second analysis, the trend analysis has both vertical and horizontal analyses in place.
From the vertical analyses the total expenditure at 96.60% illustrates that the budgeted cost at
100% would not be profitable for the entity purporting to the expenditure cost accrued. On the
other hand, the horizontal analyses for both fiscal years (budget and actual) illustrate that actual net
profit at 61.40% is profitable than the budgeted initial value at (13,000) (100%). Finally, the
business budgeted sales volume price combined shall not be favorable (1970) for conducting their
activities. The possible reason is poor operational processes, This calls for a corrective action that
would entail enforcing some of the methods such as removing current influences on the
operational plan that impact the organization negatively. For instance, the entity can utilize
advertisement campaigns to target more consumer bases which would also increase the entity’s
revenue from fees collected.
C T F TASE S UDY - I WORX LEISURE C TEN RE ersion uneV 1 (J 2014) age ofP 1 2
is lai er rinted o ies of t is do u ent are regarded as un ontrolled lease eD c m : P c p h c m c . P ch ck tt sit tafens edu auh p:// www. w. . to ensure t is is t e latesth h
ersionv .

Operational Performance6
References
Berger, A. (2011). Standard Costing, Variance Analysis and Decision-Making: Managemant
accounting and control. München: GRIN Verl.
Jordan, J. (2011). Production variance analysis in SAP controlling: [master production variance
analysis in Controlling (CO) with SAP ; reveal breakdown points in your company's
performance and explore how these processes can be improved ; learn how to make
production processes more efficient to positively impact your bottom line]. Bonn [u.a.:
Galileo Press.
Utts, J. M., & Heckard, R. F. (2005). Mind on statistics. Charlesbourg, Québec: Braille Jymico Inc.
C T F TASE S UDY - I WORX LEISURE C TEN RE ersion uneV 1 (J 2014) age ofP 1 2
is lai er rinted o ies of t is do u ent are regarded as un ontrolled lease eD c m : P c p h c m c . P ch ck tt sit tafens edu auh p:// www. w. . to ensure t is is t e latesth h
ersionv .