v liner express, inc

7/30/2019 V Liner Express, Inc

1/26


2/26

CriticalIssues Investigated1. DRIVERS POTENTIAL STRIKE

2. ACCIDENT IN THE ROAD

3. PROPOSAL TO OUTSOURCE FOOD

SERVICE

4. SPECIAL OFFER: CHARTERED BUS

5. CONFIDENTIALITY ISSUE IN

CONTRACT BIDDING (Ethical Issue)


3/26

MoSCoW Method

Must Have

Drivers Potential Strike

Should HaveAccident in the Road

Could Have

Proposal to Outsource Food Service

Wont Have

Special offer: Chartered Bus


4/26

DRIVERS POTENTIAL STRIKE


5/26


6/26

Option 2:

OFFERING AN INCENTIVE PAY BASED ON

PERFORMANCE IN ADDITION TO FIXED

SALARY

Advantages Disadvantages

Less expensive for the company to

implement

Forms a framework for rewarding

employees

Aligns the objectives of the organization

and those of the bus drivers and

conductors,

Higher motivation levels among bus

drivers and conductors

Provides company with a way to extendadditional rewards to its best

employees,

Gives employees a major incentive

Depending on the arrangement, the

bestowal of increased security to

employees may allow the company to

take a greater percentage of profits.

More expensive for the company to

implement that if it is only based on the

original fix rate set by them,


7/26

Option 3:

GRANTING EMPLOYEES DEMAND FOR

HIGHER COMPENSATION


Employees will be happy and satisfied

which in turn can lead to their sympathy

and loyalty to the company

The company will have a good image

perception from their employees and the

general public

It will create a good and healthy

relationship between the management

and their employees

Employees job security will beenhanced

Too costly for the company to implement

Eliminates the employees' incentive to

perform

Foster an environment of complacency


8/26

Option 4:

HIRE NEW DRIVERS WHO WILL AGREE

WITH MANAGEMENTS COMPENSATION

PLAN, POLICIES AND REGULATION


Significant cost savings could be

achieved since the compensation to be

paid is the one originally planned by the

company,

Improved quality can be achieved by

hiring drivers with more experience and

enhanced skills; and

Allows the company to have smooth

operations since they dont have to deal

or fix any matters. They dont need toallot much time in decision making

unlike if they proceed to collective

bargaining agreement.

Expose an organization to potential risks

and legal exposure,

Negative perceptions and the sympathy

of lost jobs might be created,

Newly hired employee may not have the

same understanding, sympathy and

passion for the organization,

Company might have a hard time

looking for new competent employees,

It will cost much to the companybecause hiring new employees require

new documentations and legal

requirements; and

It can have a negative impact on

remaining employees.


9/26

Option 1:

CONDUCT A COLLECTIVE BARGAINING

Option 2:

OFFERING AN INCENTIVE PAY BASED ON

PERFORMANCE IN ADDITION TO FIXED

SALARY

Option 3:

GRANTING EMPLOYEES DEMAND FOR

HIGHER COMPENSATION

Option 4:

HIRE NEW DRIVERS WHO WILL AGREE

WITH MANAGEMENTS COMPENSATION

PLAN, POLICIES AND REGULATION


10/26

ACCIDENT IN THE ROAD


11/26

Option 1:

RETAIN OLD BUSES


Lest costly

Avoidance of cash outflow

Lesser depreciation

expense

Higher repair and

maintenance costs.

Prone to mechanical

malfunction

Poor traveling condition Lessen the good image of

the company


12/26

Option 2:

REPLACE OLD BUSES WITH NEW BUSES


Improved operation

Better passenger

satisfaction

More attractive from

potential passenger point of

view Long-run benefits (e.g.

future savings)

Initial outlay cost

Unavailability of funds.

May incur registration, set-

up costs, and other similar

costs


13/26

Supporting computation:

Savings (P2.15M x 3yrs.) P 6,450,000

Salvage value of old bus 500,000

Less: Purchase price of new bus 7,000,000

Net cash inflows (outflows) per

bus

P(50,000)

The lost that will be incurred in the acquisition of 10 buses is P500,000,


14/26

Option 1:

RETAIN OLD BUSES

Option 2:

REPLACE OLD BUSES WITH NEW BUSES


15/26

PROPOSAL TO OUTSOURCE FOOD

SERVICE


16/26

Factors Proposal

Intends to Achieve

Reduce in the

complains from the

customers

Savings in

Management Time

and Resources

Endorsement of

Anettes Work


17/26


18/26

Cost to Make Cost to Outsource

Food cost P 890.000 P -

Labor (P85,000; P85,000 x 10%) 85,000 8,500

Variable overhead (P45,000; P45,000 x 10%) 45,000 4,500

Cafeteria food sales (P90,000; P90,000 x 115%) (90,000) (103,500)

NIFS charges (250 seats x 70% x 365 days x P14) - 894,250

Net cost P 930,000 P 803,750

Benefit P126,250

Cost of implementing the proposal:

Take note that the allocated overhead is not a relevant decision factor.


19/26

SPECIAL OFFER:

CHARTERED BUS


20/26

FACTORS AFFECTING THE

SPECIAL OFFER

Timing of the Special

Offer

Effect on Regular Sales

Possible Contracts inthe Future

Revenue (Loss) in the

Special Offer


21/26

63%

25%

12%

When Consumer Travels

During Holidays Special Occation Regular Days


Possible Contracts in

the Future Revenue (Loss) in the

Special Offer


22/26

41%

29%

11%

11%

4%4%

Brand Preference - North Bound

V Liner Other V Liner and other

Genesis Five Star Genesis and other


Offer


the Future Revenue (Loss) in the

Special Offer


23/26


Offer


Revenue (Loss) in theSpecial Offer


24/26


Offer



the Future

Special Price of the Offer P250,000

Less: Relevant Cost ofthe Special offer:

Variable operatingcost (P16100 x

3days x 3 buses)

P144,900

Savings onreservations andticketing (27,000) 117,900

Avoidable Fixedcost (P6,900 x30%) x 3 days x 3buses 18,630

Contribution Marginfrom special offer P113,470

Less: CM Loss from theforgone regular sales(peak season) 143,460

Net disadvantage inaccepting the offer P(29,990)

CM forgone:

Regular sales (P445 x 36seats) x 2 (back andforth) x 3 days x 3 buses P288,360

Variable operating cost (144,900)

Contribution Margin P143,460


25/26


26/26

Considerations:

Objectivity:

ProfessionalBehavior:

Possible Courseof Action

Confidentiality:

The key fundamental principles in the Code of

Ethics as given by the International Federation

of Accountants (IFAC)

Can Lourdes Perez safeguard against thesignificant self-interest threat which arises from

V Liners performance-related bonus scheme?

If she would accept the assignment, can she

ensure that she does not use confidentialinformation relating to her previous employer

to her advantage or to the advantage of her

current employer?

What can Lourdes do to safeguard her

reputation and the reputation of her employerand her profession?

v liner express, inc

Documents