The Squeaky Horn Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Question 1

Conceptually, what specific factors are likely to explain the difference between planned and actual results for the Squeaky Horn?

There are a number of factors which explain the difference between the planned and his actual profit of Squeaky Horn. One of the reasons due to which the actual revenues are higher as compared to the planned revenues is that the management of the company has surpassed its planned revenue by lowering the hourly charges. This had only been achieved by the management by spending around 50% more time on minor repairs and exceeding by 15% on the planned band major repairs.

The management had lowered the minor repair costs by $5 per hour but the company had spent much longer time in actual repairs and increased the overall revenue. The actual hours per job had also increased which could be explained by the time spent training and the employee turnover. Although the management did not succeed in managing their planned jobs related to the minor repairs, but they lowered the prices and became successful to beat the planned revenues.

Other reasons are that the three salaried employees of the company performed efficiently as the actual hours per job were 0.4 hours less as compared to planned hours. On the other hand, lowering the minor orchestra repairs caused a deficit in planned revenues by $ 31,200. Lastly, the external factors contributing to the difference in planned and actual profit included were the increases in the shipping expenses and costs for replacement parts that were used in major repairs by $8076 and $ 11500 respectively. The differences between revised and actual in dollar terms could be seen in the table below:

REVISED VS ACTUAL
	REVISED	ACTUAL	DIFFERENCE
Revenue	677550	664,170	13,380
Owner Salaries - Base	180000	180,000	0
Owner Salaries - Bonus	33877.5	33,209	669
Band Repairers Wages	69600	104,400	-34,800
Orchestral Repairers Salaries	114000	121,200	-7,200
Rush Job Wages	4125	3,850	275
Replacement Parts	82450	92,050	-9,600
Delivery	46252.5	53,961	-7,709
Contribution	147245	75,500	71,745
Advertising	12000	12,500	-500
Depreciation	3600	3,600	0
Office Rent	48000	48,000	0
Miscellaneous	4500	4,400	100
Profit	79145	7,000	72,145

Question 2

Prepare a revised budget with all prior planning assumptions retained, but use the total actual number of jobs the Squeaky Horn worked on (i.e., 4,405).

The revised budget has been prepared for the Squeaky Horn based upon all the stated assumptions by the management at the start of the year. In order to create a revised budget the revenues coming from the rush jobs, major repair jobs and the minor repair jobs have been separated. All the planned bill rates have been used and the actual number of the hours worked and jobs performed have been used to generate a revised budget.The total revenue equals to $ 677550 and the total expenses excluding the fixed charges are $ 530305. The revised budget shows a profit of around $ 79145 for the year. The revised budget is as follows:

REVISED BUDGET
	$
REVENUES
Band major repairs	180000
Orchestral major repairs	153000
Band minor repairs	121800
Orchestral minor repairs	214500
Rush Jobs	8250
Total Revenue	677550

EXPENSES
Base Salaries	180000
Commissions	33878
Band Repair wages	69600
Orchestral repair wages	114000
Rush job wages	4125
Replacement Parts	82450
Delivery	46252.5
Total Expenses	530305

CONTRIBUTION	147245

Advertising	12,000
Depreciation	3,600
Office Rent	48,000
Miscellaneous	4,500
PROFIT	79,145

Question 3

Prepare a profit reconciliation of planned versus actual profit by quantifying in dollar terms, all significant contributing factors.

The Squeaky Horn Case Solution

The planned profit for the year was estimated to be around $ 57745; however, the actual profit for the year was $7000. It was around $50745 lower than the expected profit for the company.This is a huge difference and there are ranges of contributing factors that have contributed to this difference in profits. The Squeaky Horn is a private business and it is facing all the challenges that are faced by private businesses in such a market.

In order to outperform the competitors, the management of the company had lowered the repair charges to increase the revenues. The management of the company had managed to accomplish this by exceeding the planned major band repairs by 15% and by spending more time of about on the minor repairs which is 50% as previously stated. Along with this, taking into account all the differences as highlighted in the first question, a huge gap had been seen between the planned and the actual profit. The profit reconciliation of planned with actual is shown below:.........................

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