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With regards to line A) of 340,
I tried calculating the percentage of trainer cost against its revenue for all quarters. I get the same percentage for all quarters, and same with room cost against revenue is the same. So these two costs seemed to me as variable costs as they changed in the same proportion as the sales. I also further stated that since they are variable, an increase in sales which was the target, would increase the room and trainer cost in same proportion, therefore the managers do not have control over the budget set for these costs. The answers do not state this. I dont know if i understood well.With regards to B) the answers at the back shows that there was also an extra 20% of trainers and rental room with an increase of 20% of sales. But in the information provided no where its writen that rental and trainers were also to increase. How to know that?
Also, what about the information provided on delaying payments to trainers? No changes were made in the forecast. Why is that?
Although the trainer and room costs are variable, that doesn’t mean that the cannot be controlled. They are both slightly higher as a % of sales.
The sales will be 20% higher (so 20% more students given that prices stay the same). The question says that they will have the same tutorial and room standards, so more students means more trainers and more rooms.
Expenses are charged when incurred, not when the cash is paid. So delaying payment will not affect the profit forecasts (it would affect cash budgets but we are not asked to prepare these).
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